Professional Documents
Culture Documents
Microeconomic Theory Basic Principles and Extensions 11th Edition Nicholson Test Bank
Microeconomic Theory Basic Principles and Extensions 11th Edition Nicholson Test Bank
Microeconomic Theory Basic Principles and Extensions 11th Edition Nicholson Test Bank
ANSWER: b
ANSWER: c
10.3 In order to minimize the cost of a particular level of output, a firm should produce where
v
b. the RTS (of L for K) = .
w
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 10: Cost Functions 39
w
c. the RTS (of L for K) =
v
v
d. the MRS = .
w
ANSWER: c
b. cost-minimizing input choices for all possible output levels for when input rental
rates expand along with production.
c. cost-minimizing input choices for all possible output levels for a fixed set of input
prices.
ANSWER: c
a. is a straight line through the origin with a slope greater than one if w > v.
b. is a straight line through the origin with a slope less than one if w < v .
c. is a straight line through the origin though its slope cannot be determined by w
and v alone.
ANSWER: c
10.6. A firm whose production function displays increasing returns to scale will have a total
cost curve that is
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
40 Chapter 10: Cost Functions
ANSWER: b
10.7 A linear total cost curve which passes through the origin implies that
ANSWER: c
10.8 As long as marginal cost is below average cost, average cost will be
a. falling.
b. rising.
c. constant.
ANSWER: a
a. both average total costs and average variable costs will be falling.
b. average total costs will be falling but average costs may be rising or falling.
d. average total costs are falling but average fixed costs may be rising.
ANSWER: a
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 10: Cost Functions 41
10.10 The average fixed cost curve always has a negative slope because
ANSWER: d
b. the underlying nature of the firm's production function when all inputs are able to
be varied.
d. the way in which the firm's expansion path reacts to changes in the rental rate on
capital.
ANSWER: b
a. marginal costs are constant but the average cost curve has a U-shape.
ANSWER: b
b. are usually greater than or equal to its short-run costs except in the case of
diminishing returns to scale.
d. are usually less than or equal to its short-run costs except in the case of
diminishing returns to scale.
ANSWER: c
10.14 An increase in the wage rate will have a greater effect on average costs
a. the larger the proportion labor costs are of total costs and the easier it is to
substitute capital for labor.
b. the larger the proportion labor costs are of total costs and the harder it is to
substitute capital for labor.
ANSWER: b
b. not affect the production function, but may shift cost curves.
c. shift a firm's production function and alter its marginal revenue curve.
d. shift a firm's production function and cause more capital (and less labor) to be
hired.
ANSWER: a
10.16 The Cobb-Douglas production function q = k .5 l .75 yields the cost function C =
(where B is a constant).
a. Bq v1 2 w3 4 .
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 10: Cost Functions 43
5/4
b. Bq v1 2 w3 4 .
4/5
c. Bq v1/2 w3/4 .
4/5
d. Bq v 2/5 w3/5 .
ANSWER: d
.8
10.17 For the cost function C = q v .4 w.6 consider the following statements:
a. None is true.
c. Only I is true.
ANSWER: d
ANSWER: a
10.19 The input demand functions that can be derived from cost functions are referred to as
“contingent” demand functions because the functions:
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
44 Chapter 10: Cost Functions
ANSWER: b
ANSWER: b
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.