Suppose the production function is q = 12 L0.25K0.75. Determine the long-run capital-to-labor ratio (K/L) if the cost a unit of capital (r) is three times the cost of a unit of labor (w). What will be an ideal response? ANSWER The firm minimizes costs by setting MRTS = w/r. MRTS = MPL /MPLK […]
Date: September 9th, 2020
Equity and efficiency can be achieved simultaneously through competition. Indicate whether the statement is true or false ANSWER False. Equity involves value judgments and achieving it will usually result in lessened efficiency.
Date: September 9th, 2020
Most of the debates in the U.S. Congress center on A) efficiency concerns. B) equity concerns. C) both efficiency and equity equally. D) market inefficiency. ANSWER B
Date: September 9th, 2020
A cake is to be shared by two people. Both desire the largest piece possible. One of the two will cut the cake. Under which of the following situations will the cutter adopt a Rawlsian social welfare function? A) The person cutting the cake chooses the first piece. B) The person not cutting the cake […]
Date: September 9th, 2020
If the costs of labor and capital increase in the same proportion, the isocost line will A) stay the same. B) shift outward in a parallel fashion. C) rotate inward around the point where only capital is employed in production. D) shift inward in a parallel fashion. ANSWER B
Date: September 9th, 2020
What are the functions for MC and AC if TC = 20q + 10q2? A) MC = 20q; AC = 10q2 B) MC = 20 + 20q; AC = 20 + 10q C) MC = 20 + 10q; AC = 10 + 10q2 D) MC = 20 + 20q; AC = 10q ANSWER B […]
Date: September 9th, 2020
No clearly defined socially preferred outcome may result when majority voting on outcomes because A) often voters don’t understand the outcomes. B) voting may violate the independence of irrelevant alternatives. C) voting may lead to incomplete preferences. D) voting may lead to non-transitive preference. ANSWER D
Date: September 9th, 2020
A U.S. firm currently produces 200 units of output according to the production function q = L0.5K0.5 and faces input prices equal to wU.S. = rU.S = $11. Should the U.S. firm move their company abroad where they will face input prices equal to wabroad = $6.50 and rabroad = $15.00? A) Yes, because the […]
Date: September 9th, 2020
A firm produces output according to the production function, q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80. What is the minimum cost of producing 1140 units of output? A) Cost = $780 B) Cost = $694 C) Cost = $2,071 D) Not enough information is given to […]
Date: September 9th, 2020
Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination) and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing? What will […]
Date: September 9th, 2020
