Production Functions types
Finish the sentence:
In Leontief K and L...
In Leontief K and L cannot be substituted for each other, and used in fixed proportions
Assume that the total cost of producing 10 units of a good is $125. What is the average total cost?
ATC = TC/ Q
ATC = 12.50
What is a sunk cost?
S cost that is forever lost once it is paid
if MPL/w > MPK/k then the firm should...?
use more labor
What causes the principle agent problem?
Differing objectives between the people attached to the firm
What is the optimum input rule?
Continue using additional units of input as long as the added benefit os greater than or equal to the added cost.
On a graph, the distance between the total variable cost curve and the total cost curve is defined by the...?
Total fixed cost
What returns to scale is this?
"A firm increases its use of all inputs by a certain percent and its output increases the same percent."
Constant returns to scale
What is the MPK of the function Q= 10LK?
MPK = 10L
When the supplier is not disciplined by the market, this would be a bad situation for which input procurement?
Vertical Integration
What is the MPL and MPK for the function, Q = min {25K, 32L} ?
MPL = 0
MPK = 0
Does d TVC/ d Q = MC?
yes
In diminishing marginal returns, the marginal cost curve...?
increases
What is the output of the function Q = 5K +3L when K=2 and L=1?
Q = 13
Home Depot purchases 5000 lbs of wood from a lumber yard for its business without paying any royalties to the lumber business. What kind of input procurement is this?
Spot exchange
Assume that in an a given isoquant K and L can produce 500 units of output. If K decreases and L increases, what quantity of output is now being produced?
Q = 500
Isoquant: combinations of K and L that produce the same quantity of output
The minimum points of the average total cost curve and the average variable cost curve is defined by the...?
Marginal cost curve
The defining attribute of long run is...?
all input can be varied (complete flexibility)
What is the output of the function Q=min{2K,7L} if K=10 and L=2
Q = 14
A mobile gas station has a legal obligation to purchase specifically from 1 distributor, this is an example of what kind of input procurement?
Contract
On this MP scale, over what range of numbers do diminishing marginal returns exist? (exact numbers)
12
18
45
32
10
-4
Diminishing marginal returns exists when MP is 32 and 10
Given the function: Q = 100 + 2Q+ 5Q2 +4Q, what is total variable cost?
TVC = 2Q+5Q2+4Q
A firm is able to produce 2 or more outputs at a lower ATC than if they were produced by multiple firms.
Economies of scope
What is the MPL of the function Q=10K0.5L0.5
MPL = 5K0.5L-0.5
Exxon-Mobil uses the oil extracted from its wells to produce raw polypropylene, a type of plastic. This is an example of what kind of input procurement?
Vertical Integration