ECON 303 - Managerial Economics Exam 2(R) Name: 1. Baseman Audio manufactures hi-fi speakers using wood, fabric, and labor. In 1995, it produced 5,000 sets of speakers using 2,000 board-feet of exotic wood, 400 bolts of fabric, and 10,000 worker hours. In 1996, it produced 7,500 sets of speakers using 2,500 board-feet of exotic wood, 500 bolts of fabric, and 15,000 worker-hours. In 1095, the price of exotic wood was $20 per board-foot, the price of fabrie was $200 per bolt, and the wage rate was $8 per hour. Thus, from 1995 to 1996 Baseman's total factor productivity increased by (be sure to carry intermediate calculations to at least four decimals): 2. Ifthe production function is Q product of labor when L ah. and capital is fixed at | unit, then the marginal 3. 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 feasted: ON more capital and less labor. Gu d) none of the above. more labor and less capital ©. three times more capital than labor. d. none of the above. 4. A clinic uses both physician assistants and nurses to care for patients. The last physician assistant hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients ina year. If physician assistants make $80,000 a ‘year and nurses make $40,000 a year. then: the clinic would improve productivity and minimize costs by hiring more physician assistants and/or fewer nurses. 1b the clinic could improve productivity and minimize costs by hiring fewer physician assistants and/or more nurses. . the clinic should use only physician assistants, because they are more productive. 4. the clinic should use only nurses, because they can be paid a lower wage. vECON 303 - Managerial Economics Exam 2 (R) 5. The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is camings and L is the number of hours of leisure. How much will the worker eam if he takes 14 hours of leisure per day? a, $150. ‘b. $240. 6. $100, d. $200. 6. Suppose the production function is Q = min (K, 2). How much output is produced when 9 units of capital and 4 units of labor are employed? bt / 7. The production function for a competitive firm is Q= K*L*. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one amit, Assuming zero cost of the fixed input, the maximum profit is: ae b. “a. a. 5. b. 10. «15. d. none of the above. 8. The demand for answering machines is Qy= 1,000 - 150P + 25M. Assume that per capita disposable income M is $200 and the price of answering machines is P = $10. Based on this information, answering machines are: a. inferior goods. b. unnecessary goods. c. luxury goods. &) normal goods. e” substitutes for televisions. 9. What is the value marginal product of labor if: P = $10, MP, ~ 25, and APL = 40? a. $10,000, b. $1,000. ¢..$400. ‘4,)$250. 10. The production function for a competitive firm isQ=K*°L*. The firm sells its ‘output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The profit-maximizing quantity of labor is; BOWS. (o/1. ce. 10. d_ none of the above.ECON 303 - Managerial Economics Exam 2 (R) 11. If the production function is Q = K°L° and capital is fixed at 1 unit, then the average product of labor when L ~25 is: a. 2/5. 7B us. “é. 10. A. none of the above. 12. Given that income is $500 and Px = substitution between goods X and Y? 1. 100. by 4. 20 and Py = $5, what is the market rate of 4. 25. 13, 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 7 L 45. 14, The demand for answering machines is Qy~ 1,000 - 150P + 25M. Assume that per capita disposable income M is $200, When the price of answering machines is P=$10, the income elasticity of demand is: a 25, b. OL ©. 10, a. 25.0. g) LLL. 7 15. Given the prodvetion function Q~ min (4K, 3L), what is the average produet of capital when 8 units of capital and 16 units of labor are used? a. 16. 16. 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? of; ny po de era>ECON 303 - Managerial Economics Exam 2 (R) 17. What is the maximum amount of good Y that can be purchased if X and Y are the only.swo goods available for purchase and P, = $5, P, = $10, X= 20, and M ~ 500? G40. b. 25. e. 50. 4. 75, 8. Suppose the production function is given by Q=K'7L", and that Q = 30 and K = 25 How much labor is employed by the firm? a. 49, b.6. Vy £36, 4.25, 19. Given the linear production function Q = 10K + SL, if Q= 10,000 and K = 500, how much labor is utilized? a, 600 units b. 800 units. c. 500 units. d. 1,000 units. 20. The production function Q = L°K* is called: a: Cobb Douglas. »b. Leontief, e. Linear. 4. none of the above.