Farmer Jones bought his farm for $75,000 in 1980 and wants to sell it.Today the farm is worth $500,000, and the interest rate is 10 percent.ABC Corporation has offered to buy the farm today for $510,000 and XYZ Corporation has offered to buy the farm for $540,000 one year from now.Farmer Jones could earn net profit of $ 25,000 (over and above all of his expenses) if he farms the land this year.What should he do?

Question 1 options:

Sell to ABC Corporation.

Farm the land for another year and sell to XYZ Corporation.

Accept either offer as they are equivalent.

Reject both offers.

None of these

Question 2(1 point)

The difference between the economic and accounting costs of a firm are

Question 2 options:

the accountant's fees

the corporate taxes on profits

the opportunity costs of the factors of production that the firm owns

the sunk costs incurred by the firm

the explicit costs of the firm

Question 3(1 point)

Scenario 1:

The average total cost to produce 100 cookies is $0.25 per cookie.The marginal cost is constant at $0.10 for all cookies produced

Refer to Scenario 1. The total cost to produce 50 cookies is

Question 3 options:

$20

$25

$50

$60

indeterminate

Question 4(1 point)

Scenario 1:

The average total cost to produce 100 cookies is $0.25 per cookie.The marginal cost is constant at $0.10 for all cookies

Refer to Scenario 1. For 100 cookies, the average total cost is

Question 4 options:

falling

rising

neither rising nor falling

less than average fixed cost

Question 5(1 point)

5. For any given level of output:

Question 5 options:

marginal cost must be greater than average cost.

average variable cost must be greater than average fixed cost.

average fixed cost must be greater than average variable cost.

fixed cost must be greater than variable cost.

none of the above is necessarily correct.

Question 6(1 point)

Consider the following statements when answering this question

I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too.

II. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too.

Question 6 options:

I is true, and II is false.

I is false, and II is true.

I and II are both true.

I and II are both false.

Question 7(1 point)

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be

Question 7 options:

500.

25/500.

-0.8

-0.5

25/20 or 1/4.

Question 8(1 point)

Which of the following is NOT an expression for the cost minimizing combination of inputs?

Question 8 options:

MRTS = MP_L/MP_K.

MP_L/w = MP_K/r.

MRTS = w/r.

MP_L/MP_K= w/r.

None of these.

Question 9(1 point)

The total cost of producing a given level of output is

Question 9 options:

maximized when a corner solution exists.

minimized when the ratio of marginal product to input price is equal for all inputs.

minimized when the marginal products of all inputs are equal.

minimized when marginal product multiplied by input price is equal for all inputs.

Question 10(1 point)

At the optimum combination of two inputs,

Question 10 options:

the slopes of the isoquant and isocost curves are equal.

costs are minimized for the production of a given output.

the marginal rate of technical substitution equals the ratio of input prices.

all of the above.

(a) and (c) only.

Question 11(1 point)

Question 11 options:

P_L+ 20P_K

100 = 10L + 20K

100 = 30(L+K)

none of the above

Question 12(1 point)

A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm

Question 12 options:

is producing its current output level at the minimum cost.

could reduce the cost of producing its current output level by employing more capital and less labor.

could reduce the cost of producing its current output level by employing more labor and less capital.

could increase its output at no extra cost by employing more capital and less labor.

both (b) and (d) are true.

Question 13(1 point)

. Consider the following statements when answering this question

I. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then the marginal costs of production are constant too.

II. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then short-run average total costs cannot rise as output rises.

Question 13 options:

I is true, and II is false.

I is false, and II is true.

I and II are both true.

I and II are both false.

Question 14(1 point)

Scenario 2:The production function for earthquake detectors (Q) is given as follows:

Q = 4K^1/2L^1/2, where K is the amount of capital employed and L is the amount of labor employed.The price ofcapital,P_K, is $18 and the price of labor, P_L, is $2.

Refer to Scenario 2.Suppose that you receive an order for 60 earthquake detectors.How much labor will you use to minimize the cost of 60 earthquake detectors?

Question 14 options:

1

5

10

45

none of the above

Question 15(1 point)

Scenario 2:The production function for earthquake detectors (Q) is given as follows:

Q = 4K^1/2L^1/2, where K is the amount of capital employed and L is the amount of labor employed.The price ofcapital,P_K, is $18 and the price of labor, P_L, is $2.

Refer to Scenario 2.Suppose that you receive an order for 80 earthquake detectors.How much capital will you use to minimize the cost of 80 earthquake detectors?

Question 15 options:

20/3

5

2/3

80/18

none of the above

Question 16(1 point)

Scenario 2:The production function for earthquake detectors (Q) is given as follows:

Q = 4K^1/2L^1/2, where K is the amount of capital employed and L is the amount of labor employed.The price ofcapital,P_K, is $18 and the price of labor, P_L, is $2.

Refer to Scenario 2.Suppose that in order to produce Q=48 detectors 16 units oflabor and 9 units of capital were being used.What is marginal rate of technical substitution of labor for capital,MRTSLK, when 9 units of capital and 16 units of labor were employed ?

Question 16 options:

1.78

0.5625

6.0

0.2222

none of the above

Question 17(1 point)

A firm's short-run average cost curve is U shaped. Which of these conclusions can be reached regarding the firm's returns to scale?

Question 17 options:

The firm experiences increasing, constant, and decreasing returns to scale in that order.

The firm experiences first decreasing, then increasing returns to scale.

The short-run average cost curve reveals nothing regarding returns to scale.

The firm experiences decreasing returns to scale.

The firm experiences increasing returns to scale.

Question 18(1 point)

Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit. What is the total cost of producing 80 units of output?

Question 18 options:

$25

$200

$225

$25

none of the above

Question 19(1 point)

19Suppose that the production function can be written as Q = K^0.6L^0.3. In the long run,

Question 19 options:

LRAC is negatively sloped for all levels of output.

the firm hires twice as much capital as labor.

LRAC is positively sloped for all levels of output.

the marginal product of capital is twice the marginal product of labor.

None of the above