1. Bob's electronic bike shop's production function is given by q = -5 L³ + 20L² +10L. The marginal product of labor is

A) MP = 10 + 40L -15L²

B) MP = 10 + 20L -5L²

C) MP = 10L

D) MP = 10 + 20L

2. Average productivity will fall as long as

A) marginal productivity is falling.

B) it exceeds marginal productivity.

C) it is less than marginal productivity.

D) the number of workers is increasing.

3. Which of the following is most likely to exhibit diminishing marginal returns to labor?

A) a store that obtains a new machine for every new worker hired

B) a store that hires more workers and never increases the amount of capital

C) a store that increases the amount of capital and holds the number of worker constant

D) None of these situations will result in diminishing marginal returns to labor.

4. The marginal rate of technical substitution always equals

A) the slope of the total product curve.

B) the ratio of the marginal products of inputs.

C) the change in output due to a change in the amount of one input.

D) the distance between two isoquants.

5. Bob's electric bike shop rents retails space from his friend Rob for $4000 per month. Rob is considering increasing the rent to $5000 per month. With this increase in rent, Bob's marginal cost of electric bike building will

A) increase by $1000 divided by the number of bikes built.

B) increase by $1000.

C) decrease by $1000.

D) not change.

6. Suppose that the average cost of building electric bikes is positive. This implies that the

A) marginal cost equals average cost.

B) marginal cost exceeds average cost.

C) marginal cost is less average cost.

D) Not enough information is provided.

7. Suppose that the Bob's marginal cost of producing an electronic bike is increasing as Bob produces more electric bikes. Therefore, which of the following must be TRUE?

A) AFC is rising.

B) AVC is rising.

C) MC > AVC.

D) MPL is falling.

8. Firms that exhibit price-taking behavior

A) wait for other firms to set price, take it as given, and charge a higher price.

B) have outputs that are too small to influence market price and thus take it as given.

C) take pricing behavior into their own hands.

D) are independently capable of setting price.

9. Suppose Bob signs a contract to rent a shop to sell his basketballs for $7,000 per month and the contract prohibits Bob from subletting. The variable cost to produce each basketball is $20. Bob gets an estimate for the demand he will face in the coming month, which predicts that he can sell his basketballs for $25 each but can only sell 1000 basketballs at most each month.

A) Bob should shut down the business.

B) Bob should keep operating.

C) Bob should sell less.

D) None of the above.

10. Suppose a perfectly competitive firm has the following total cost function:

TC = 10 + (0.1 q²). The market demand is given by Q = 100 - 10p. If p = 10, the firm's profits will be

A) 240.

B) 250.

C) 260.

D) -10 because the firm will shut down.

11. If a monopoly is operating on the demand curve where price elasticity is equal to -3, and price equals 3, then MR is equal to

A) -1.

B) 1.

C) -2.

D) 2.

12. Bob's price/marginal cost ratio for electric bikes is 3.1. This ratio is most likely to decline if

A) the number of nearby electric bikes competitors increases.

B) the number of nearby electric bikes competitors decreases.

C) the demand curve for electric bikes shifts rightward.

D) the demand curve for electric bikes becomes steeper.

1. Bob's electric bike has the following production function q = - L² + 20L where L is the number of employees working for Bob and the number of electronic bikes is given by q.

a. Calculate the Marginal Product of Labor (MPL) and the Average Product of Labor (APL).

b. For what values of L is the MPL > 0? For what values of L is the MPL diminishing?

2. Suppose Bob's electric bike shop has the following production function: q = (L^x + K^x)^1/y For what values of X and Y will Bob's production function exhibit constant returns to scale?