RK.L)-KL. This production function for a firn is &. Suppose the production funct
ID: 1128155 • Letter: R
Question
RK.L)-KL. This production function for a firn is &. Suppose the production function for a firm is O-RKL)-K a Decreasing returns to scale b. Constant returns to scale. Increasing returns to scale. response to a e. d. Cannot be determined 7. The cross price elasticity of demand for a good is the given percentage change in percentage change in the quantity demanded in a. income. b. the price of that good. c. the price of another good. d the quantity demanded of another good 8. Ifa firm is a price-taker, then its marginal revenue will: a. Be less than the demand curve b. Be downward soping. e. Equal market price. d Equal zero.. 9. If Green Acres Turf Farm's total cost of producing acres of sod is TC- s0+250+ producing the 20th acre of sod is a. $30. b $25. c. $105. d. $185 e· $225. 10. A competitive firm faces a market price of S4. It is currently producing 800 units of output. At this level of output the firm's total costs are $5000 while its total variable costs are $3000. This firm should a. shut down because it is making losses b. expand its output to cover the loss c raise the price above the average cost d continue production since it is covering its total variable costs and would lose more in fixed costs by shutting down 11. While setting price equal to marginal cost is the socially optimal outcome, forcing a natural monopolist to charge a price equal to marginal cost is not a feasible regulatory price because at this price the monopolist will incur operating losses since the price does not cover the average cost of a. at this price the monopolist will make a large profit c. b. at this price the monopolist will discriminate among its consumers d. at this price the monopolist produces an output that is too low 12. If an industry that is perfecetly competitive were to become monopolized, which of the following would occur assuming no change in the market demand curve? that is perfectly competitive were to become monopolized, which of the following would occur, a. b. c. both price and output would remain unchanged price would increase and output would decrease both price and output would decrease d. price would decrease and output would increaseExplanation / Answer
6. To know if a production function exhibits return to scale, we have to multiply each input with a positive constant(m>0). And then see if the whole production function is multiplied with a no. that is higher, lower or equal to the constant, 'm'.
Here if we multiply each input by 'm',
Q= (Km)¼ . (Lm)
Or, Q= m7/12.(K)¼. (L)
The production function exhibits decreasing returns to scale as the production function is multiplied by a no. That is Lower than the constant, 'm' ( m7/12 < m).
Answer- option A
7. Cross price elasticity of demand is the percentage change in the Quantity demanded of a good in response to the percentage change in the price of another good.
Cross price elasticity of demand = ( change in quantity demanded of good X / change in price of good Y)
Answer- option C
8. For a price taker firm (for example, Firms in perfect competition) , P= AR= MR
Answer- option C
9. TC = 5Q² + 25Q +30
Therefore, MC = d(TC)/dQ = 10Q + 25
For Q= 20, MC= $(200+25) = $225
Answer- option E
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