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Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 5 units of capital and 10 units of labor are employed?
Correct answer(s):
- 11
Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 5 units of capital and 10 units of labor are employed?
Correct answer(s):
- 3
Suppose the production function is given by Q = min {K, L}. How much output is produced when 4 units of labor and 9 units of capital are employed?
Correct answer(s):
- 9
Suppose the production function is given by Q = min{K, L}. How much output is produced when 10 units of labor and 9 units of capital are employed?
Correct answer(s):
- 9
Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed?
Correct answer(s):
- 3
Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?
Correct answer(s):
- 7
Suppose the production function is Q = min {K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?
Correct answer(s):
- 8
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use
Correct answer(s):
- More labor and less capital
Suppose that a consumer’s preferences are well behaved in that properties 4-1-4-4 are satisfied and the initial equilibrium consumption bundle consists of 100 units of X and 50 units of Y. If PX increases such that the new equilibrium consumption bundle is 150 units of X and 75 units of Y, then goods X and Y are
Correct answer(s):
- Complements
Suppose that a consumer’s preferences are well behaved in that properties 4-1-4-4 are satisfied and the initial budget constraint is given by 300 = 2X + 4Y. At the initial budget constraint, this consumer purchases 100 units of good X and 25 units of good Y. Suppose the price of X increases to $4 per unit resulting in a new consumption bundle consisting of 60 units of X and 15 units of Y. Then, slope of the inverse demand for good X over this consumption range is
Correct answer(s):
- -0.05
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y decreases. Then, which of the following effect is known with certainty.
Correct answer(s):
- The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y increases. Then, which of the following effect is known with certainty.
Correct answer(s):
- The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good Y
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y increases. Then, which of the following effect is known with certainty.
Correct answer(s):
- There will be an indeterminate effect on the consumption of good X
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y decreases. Then, which of the following effect is known with certainty.
Correct answer(s):
- The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good X increases. Then, which of the following effect is known with certainty.
Correct answer(s):
- The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume
Correct answer(s):
- More of good X and less of good Y
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and the price of good X increases. Then the substitution effect will lead consumers to consume
Correct answer(s):
- Less of good X and more of good Y
Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume
Correct answer(s):
- More of good X and less of good Y
When the price of one good decreases, the associated substitution effect is represented by a
Correct answer(s):
- Move along a given indifference curve holding real income constant
When the price of one good increases, the associated income effect is represented by a move from one indifference curve to a
Correct answer(s):
- Lower indifference curve since real income is now lower