Suppose the production function is given by Q = 4K + 6L. What is the average product of capital when 10 units of capital and 5 units of labor are employed?

  • 7

Suppose the production function is given by Q = 2K + 5L. What is the marginal product of labor when 15 units of capital and 10 units of labor are employed?

  • 5

Suppose the production function is Q = min {3K, L}. How much output is produced when 6 units of labor and 3 units of capital are employed?

  • 6

Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use

  • More capital and less labor
Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage, there exist
  • Dis economies of scale

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of

  • All factors of production

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to

  • Only a minor reduction in costs

When there are economies of scope between two products which are separately produced by two firms, merging into a single firm can

  • Accomplish a reduction in costs
Cost complementary exits in a multi-product cost function when
  • The marginal cost of producing one output is reduced when the output of another product is increased

If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use

  • Less of labor and more of capital

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use

  • Less capital and more labor