Q.1

A goat herder has the cost function C(y)=4y^2, where y isthe number of tubs of goat cheese she makes permonth. She faces a competitive market for goatcheese, with a price of $32 per tub. How many tubsshould she produce per month?

40^0.5

4

10^0.5

16

5

Q2.

A firm has the production functionf(x,y)=x^1.4.y^0.9.This firm has

decreasing returns to scale and increasing marginal product for factorx.

constant returns to scale.

increasing returns to scale and decreasing marginal product for factorx.

decreasing returns to scale and decreasing marginal products for factorx.

None of the above.

Q3.

Consider a price-taking firm withproduction function f(x,z)=x^0.5.z^0.5. If the price of factor x is $12 and the price of factor z is $24, which of the following conditions must hold if the firm wants to maximiseits profits?

x = 2z.

x = 24z.

x = 0.50z.

x = z.

We can't tell without knowing the price of the output.

Q4.

Consider a price-taking firm that uses labour(L) and capital (K) to produce output according to the production function f(L,K) = 12x^0.25y^0.75. If the firm is minimisingits production costs and if the price of capital is 2 times the price of labourthen its chosen input bundle should satisfy:

K=L/27

K=L

K=L/3

2K=3L

K=L/9

Q5.

If two input bundles are on the same isocostline, then:

a.both bundles produce the same quantity of output.

b.total expenditure on inputs would be the same, no matter which bundle is purchased.

c.average production cost would be the same, no matter which bundle is used.

d.both bundles generate the same total profit.

e.None of the above.