Suppose the production function is given by Q = 5K + 3L. What is the average product of capital when 10 units of

capital and 10 units of labor are employed?

5

8

3

30

Consider a market characterized by the following inverse demand and supply functions:

PX = 30 – 3QX and PX = 10 + 2QX. Compute the surplus consumers receive when a $24

per unit price floor is imposed on the market.

$0.

$12.

$24.

$6.

Suppose the demand for good X is given by Qxd = 10 – 2Px + Py + M. The price of good X is $1, the price of good Y is

$10, and income is $200. Given these prices and income, how much of good X will be purchased?

1.

210.

218.

None of the statements associated with this question are correct.

Suppose market demand and supply are given by Qd = 100 – 2P and QS = 5 + 3P. If the government sets a price floor

of $20 and agrees to purchase all surplus at $20 per unit, the total cost to the government will be:

$1,200.

$20.

$100.

$1,300.

Suppose demand is given by Qxd = 25 − 5Px + 2Py + Ax, where Px = $10, Py = $5, and Ax = $100. What is the

advertising elasticity of demand for good x?

1

1.18

0.85

0.52

For a cost function C = 100 + 5Q + 2Q2, the average variable cost of producing 10 units

of output is:

10.

25.

35.

None of the answers are correct.

Suppose the demand for X is given by Qxd = 100 – 2PX – 4PY + 10M + 2A, where PX represents the price of good X,

PY is the price of good Y, M is income, and A is the amount of advertising on good X. Based on this information, we

know that good X is a:

substitute for good Y and a normal good.

complement for good Y and an inferior good.

complement for good Y and a normal good.

substitute for good Y and an inferior good.

You’ve recently learned that the company where you work is being sold for $300,000. The company’s income

statement indicates current profits of $11,000, which have yet to be paid out as dividends. Assuming the company will

remain a “going concern” indefinitely and that the interest rate will remain constant at 9 percent, at what constant rate

does the owner believe that profits will grow?

Instruction: Round your response to 2 decimal places.

Growth rate of:

percent.

The supply curve for product X is given by QXS = -520 + 20PX .

a. Find the inverse supply curve.

P=

+

Q

b. How much surplus do producers receive when Qx = 400? When Qx = 1,200?

When QX = 400: $

When QX = 1,200: $

A firm produces output according to a production function:

Q = F(K,L) = min {2K,4L}.

a. How much output is produced when K = 2 and L = 3?

b. If the wage rate is $30 per hour and the rental rate on capital is $10 per hour, what is the cost-minimizing input mix

for producing 4 units of output?

Capital:

Labor:

c. How does your answer to part b change if the wage rate decreases to $10 per hour but the rental rate on capital

remains at $20 per hour?

Capital increases and labor decreases.

It does not change.

Capital decreases and labor increases.

Capital and labor increase.

Suppose the cross-price elasticity of demand between goods X and Y is -4. How much would the price of

good Y have to change in order to change the consumption of good X by 10 percent?

percent

If Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 2.9, how will the

prospect of an economic bust (expected to decrease consumers’ incomes by 4 percent over the next year) impact the

quantity of coffee Starbucks expects to sell?

Instruction: Round your response to 2 decimal places.

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