Question

5 What is the MRTS for a firm with the following production function, q = 10 L0.8 K0.6 ?

A. MRTS = -(1.4)(K/L)

B. MRTS = -(3/4)(L/K)

C. MRTS = -(4/3)(K/L)

D. MRTS = -(4/3)(L/K)

6 How much capital does a firm require to produce q = 3200 when labor is 4 and they have a production function equal to q = 200 L0.5 K0.5 ?

A. K = 8

B. K = 16

C. K = 25

D. K = 64

8 Suppose the production of smartphones can be represented by the following production function: Which of the following statements is (are) TRUE?

A. Capital and labor can be substituted for one another.

B. The marginal productivity of labor falls as labor increases.

C. The production function has decreasing returns to scale.

D. All of the above.

11 If the FDA requires allergy drug firms to add an additional ingredient to make pills less prone to cause drowsiness, then this requirement will:

A. have no effect on the firm's marginal cost.

B. increase the firm's marginal cost.

C. decrease the firm's marginal cost.

D. More information is needed to answer the question.

12 A firm producing custom cabinetry has chosen L and K such that the MP of the last laborer was 30 and the marginal product of the last unit of capital was 70. Further, w = $25 and r = $40. If so, then:

A. the firm is not using the cost-minimizing level of K and L, and should use more K and less L.

B. the firm is using the cost-minimizing level of K and L.

C. the firm is not using the cost-minimizing level of K and L, and should use more L and less K.

D. the firm should shut down because profits are likely negative.

Answer 1