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.