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1 Consider a firm that produces using only labor and capital. If both labor and capital are increased by 6.0%, output goes up by 4.2%. This firm is experiencing __________ returns to scale, and its isoquants will get __________ as production increases.
A decreasing; closer together
B decreasing; further apart
C increasing; closer together
D increasing; further apart
2 In the short run, a firm charges $4 per unit and sells 620 units of output. Its short run variable costs (SVC) are $2500; its short run fixed costs (SFC) are $3000; and its short run total costs are therefore $5500. From this information, we can see that in the short run the firm
A should produce but will make 0 economic profit
B should produce and will make positive economic profit
C should exit
D should shut down
3 For the next two questions, consider a firm that produces and sells 20,000 units of output that sell for a price of $51 each. Carefully following numeric instructions, calculate the firm's accounting profits if total costs equal $612,500.
_________
4. Consider again the firm that produces and sells 20,000 units of output that sell for a price of $51 each and has total costs of $612,500. Carefully following numeric instructions, calculate the firm's economic profits if the firm's owner could earn $400,000 working elsewhere.
_________
5 .Consider a cost-minimizing firm that can produce 10,000 units of output using 150 units of capital and 25 workers. Alternatively, the firm could produce the same amount if it instead used 120 units of capital and 26 workers.
If the firm pays $0.50 per hour to rent its capital (machinery), then the wage rate must be $__________.