Chapter 4 1 Suppose the utility function for a firm manager is U bQ, where Q is output, is profit, and b is a positive constant How would the firm's output compare with what it would be if the manager's objective was to maximize profit A It would be greater than the profit maximizing output B It would be less than the profit maximizing output C It would be the same as the profit maximizing output D None of the statements is correct 2 Suppose a consumer with an income of $100 is faced with P x 1 and P y 1 2 What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis) A 0 50 B 1 0 C 2 0 D 4 0 3 The difference between a price decrease and an increase in income is that A A price decrease does not affect the consumption of other goods, while an increase in income does B An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope C A price decrease decreases real income, while an increase in income increases real income D A price decrease leaves real income unchanged, while an increase in income increases real income 4 joe prefers a three pack of soda to a six pack What properties does this preference violate A Completeness B Transitivity C More is better D Diminishing MRS 5 Which of the following is true A Indifference curves may intersect B At a point of consumer equilibrium, the MRS always equals 1 C If income increases, a consumer will always consume more of a good D None of the statements is correct 6 If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15 A 0 B 2 C 3 D Cannot tell based on the above information 7 Individuals who purchase services and goods for the purpose of consumption are A consumers B managers C workers D agents 8 What is are the important things that must be developed when characterizing consumer behavior A Individual goals of the firm B Consumer opportunities C Individual goals of the firm and consumer opportunities D Consumer preferences and consumer opportunities 9 The possible goods and services a consumer can afford to consume represents the A consumer behavior B consumer preferences C consumer status D consumer opportunities 10 A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of A more is better B completeness C substitutability D complementarity Chapter 5 Questions 1 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 A more capital and less labor B more labor and less capital C three times more capital than labor D none of the answers are correct 2 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 A 2 B 4 C 8 D 9 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 A 3 B 4 C 7 D 45 4 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 A 3 B 4 C 11 D 45 5 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 A 0 B 4 C 9 D 13 6 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 A 0 B 4 C 9 D 13 7 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 A 3 B 4 C 11 D 45 8 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 A 3 B 4 C 11 D 45 9 For the cost function C(Q) 100 2Q 3Q 2 , the marginal cost of producing 2 units of output is A 2 B 3 C 12 D 14 10 For the cost function C(Q) 100 2Q 3Q 2 , the average fixed cost of producing 2 units of output is A 100 B 50 C 3 D 2

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Chapter 4 1 Suppose the utility function for a firm manager is U     bQ, where Q is output, is profit, and b is a positive constant  How would the firm's output compare with what it would be if the manager's objective was to maximize profit  A  It would be greater than the profit maximizing output  B  It would be less than the profit maximizing output  C  It would be the same as the profit maximizing output  D  None of the statements is correct  2 Suppose a consumer with an income of $100 is faced with P x   1 and P y   1 2  What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)  A  0 50 B   1 0 C   2 0 D   4 0 3 The difference between a price decrease and an increase in income is that A  A price decrease does not affect the consumption of other goods, while an increase in income does  B  An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope  C  A price decrease decreases real income, while an increase in income increases real income  D  A price decrease leaves real income unchanged, while an increase in income increases real income  4 joe prefers a three pack of soda to a six pack  What properties does this preference violate  A  Completeness B  Transitivity C  More is better D  Diminishing MRS 5 Which of the following is true  A  Indifference curves may intersect  B  At a point of consumer equilibrium, the MRS always equals 1  C  If income increases, a consumer will always consume more of a good  D  None of the statements is correct  6 If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15  A  0 B  2 C  3 D  Cannot tell based on the above information  7 Individuals who purchase services and goods for the purpose of consumption are  A  consumers  B  managers  C  workers  D  agents  8 What is are the important things that must be developed when characterizing consumer behavior  A  Individual goals of the firm B  Consumer opportunities C  Individual goals of the firm and consumer opportunities D  Consumer preferences and consumer opportunities 9 The possible goods and services a consumer can afford to consume represents the  A  consumer behavior  B  consumer preferences  C  consumer status  D  consumer opportunities  10 A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of  A  more is better  B  completeness  C  substitutability  D  complementarity  Chapter 5 Questions 1 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  A  more capital and less labor  B  more labor and less capital  C  three times more capital than labor  D  none of the answers are correct  2 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  A  2 B  4 C  8 D  9 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  A  3 B  4 C  7 D  45 4 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  A  3 B  4 C  11 D  45 5 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  A  0 B  4 C  9 D  13 6 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  A  0 B  4 C  9 D  13 7 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  A  3 B  4 C  11 D  45 8 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  A  3 B  4 C  11 D  45 9 For the cost function C(Q)   100   2Q   3Q 2 , the marginal cost of producing 2 units of output is  A  2  B  3  C  12  D  14  10 For the cost function C(Q)   100   2Q   3Q 2 , the average fixed cost of producing 2 units of output is  A  100  B  50  C  3  D  2

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Chapter 4 1.Suppose the utility function for a firm manager is U = + bQ, where Q is output, is profit, and b is a

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