Questions 1-17: Multiple Choice

# Form A Form B
1 C C
2 B A
3 A D
4 D B
5 D A
6 C C
7 A D
8 D D
9 C A
10 A A
11 A D
12 C C
13 A B
14 A B
15 C C
16 A C
17 D B

Problem 18

Done in class.

a) We plug K=25 into the production function, obtaining short-run production function Q(L) = f(L,25) = 5 + 10L1/2.

b) Up to Q(0) = 5 robots may be produced without using any labor.

c) With a capital rental rate of $50 and 25 units of capital, the fixed cost of capital is 25 x 50 = 1250. The variable cost is zero since no labor is needed for up to 5 robots. This means the total cost is TC = $1250 and the average total cost is AVC = 1250/Q. Graph these to obtain the answer.