CHAPTER 20: Profit Maximization
MULTIPLE CHOICE
1. In Problem 1, the production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor
is $8 and the price of output is 4, how many units of labor will the firm hire?
a.
16
b.
8
c.
4
d.
24
e.
None of the above.
2. In Problem 1, the production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor
is $16 and the price of output is 16, how many units of labor will the firm hire?
a.
32
b.
64
c.
192
d.
128
e.
None of the above.
3. In Problem 1, the production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor
is $12 and the price of output is 12, how many units of labor will the firm hire?
a.
32
b.
192
c.
64
d.
128
e.
None of the above.
4. In Problem 1, the production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor
is $12 and the price of output is 9, how many units of labor will the firm hire?
a.
54
b.
81
c.
13.50
d.
27
e.
None of the above.
5. In Problem 1, the production function is given by F(L) = 6L2/3. Suppose that the cost per unit of labor
is $16 and the price of output is 16, how many units of labor will the firm hire?
a.
64
b.
192
c.
32
d.
128
e.
None of the above.
6. In Problem 2, the production function is given by f(x) = 4x1/2. If the price of the commodity produced
is $100 per unit and the cost of the input is $15 per unit, how much profit will the firm make if it
maximize profits?
a.
$2,666.67
b.
$1,331.33
c.
$5,337.33
d.
$2,651.67
e.
$1,336.33
7. In Problem 2, the production function is given by f(x) = 4x1/2. If the price of the commodity produced
is $50 per unit and the cost of the input is $40 per unit, how much profit will the firm make if it
maximize profits?
a.
$235
b.
$123
c.
$250
d.
$504
e.
$128
8. In Problem 2, the production function is given by f(x) = 4x1/2. If the price of the commodity produced
is $100 per unit and the cost of the input is $45 per unit, how much profit will the firm make if it
maximize profits?
a.
$1,781.78
b.
$873.89
c.
$888.89
d.
$442.44
e.
$447.44
9. In Problem 2, the production function is given by f(x) = 4x1/2. If the price of the commodity produced
is $90 per unit and the cost of the input is $45 per unit, how much profit will the firm make if it
maximize profits?
a.
$720
b.
$1,444
c.
$705
d.
$358
e.
$363
10. In Problem 2, the production function is given by f(x) = 4x1/2. If the price of the commodity produced
is $50 per unit and the cost of the input is $25 per unit, how much profit will the firm make if it
maximize profits?
a.
$804
b.
$385
c.
$400
d.
$198
e.
$203
11. In Problem 11, the production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $4 and the price
of factor 2 is $6, in what proportions should the firm use factors 1 and 2 if it wants to maximize
profits?
a.
x1 = x2.
b.
x1 = 0.67x2.
c.
x1 = 1.50x2.
d.
We can’t tell without knowing the price of output.
e.
x1 = 6x2.
12. In Problem 11, the production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $14 and the
price of factor 2 is $7, in what proportions should the firm use factors 1 and 2 if it wants to maximize
profits?
a.
x1 = 0.50x2.
b.
x1 = x2.
c.
We can’t tell without knowing the price of output.
d.
x1 = 2x2.
e.
x1 = 7x2.
13. In Problem 11, the production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $8 and the price
of factor 2 is $4, in what proportions should the firm use factors 1 and 2 if it wants to maximize
profits?
a.
We can’t tell without knowing the price of output.
b.
x1 = x2.
c.
x1 = 0.50x2.
d.
x1 = 2x2.
e.
x1 = 4x2.
14. In Problem 11, the production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $8 and the price
of factor 2 is $16, in what proportions should the firm use factors 1 and 2 if it wants to maximize
profits?
a.
x1 = x2.
b.
x1 = 0.50x2.
c.
x1 = 2x2.
d.
We can’t tell without knowing the price of output.
e.
x1 = 16x2.
15. In Problem 11, the production function is f(x1, x2) = x1/21x1/22. If the price of factor 1 is $10 and the
price of factor 2 is $20, in what proportions should the firm use factors 1 and 2 if it wants to maximize
profits?
a.
We can’t tell without knowing the price of output.
b.
x1 = 2x2.
c.
x1 = 0.50x2.
d.
x1 = x2.
e.
x1 = 20x2.
16. In Problem 9, when Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of
fertilizer is 1 − N/200 bushels of corn. If the price of corn is $3 per bushel and the price of fertilizer is
$.30 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to
maximize his profits?
a.
180
b.
360
c.
94
d.
368
e.
200
17. In Problem 9, when Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of
fertilizer is 1 − N/200 bushels of corn. If the price of corn is $4 per bushel and the price of fertilizer is
$.40 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to
maximize his profits?
a.
360
b.
94
c.
180
d.
368
e.
200
18. In Problem 9, when Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of
fertilizer is 1 − N/200 bushels of corn. If the price of corn is $4 per bushel and the price of fertilizer is
$.40 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to
maximize his profits?
a.
368
b.
94
c.
360
d.
180
e.
200
19. In Problem 9, when Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of
fertilizer is 1 − N/200 bushels of corn. If the price of corn is $1 per bushel and the price of fertilizer is
$.40 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to
maximize his profits?
a.
64
b.
120
c.
248
d.
240
e.
200
20. In Problem 9, when Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of
fertilizer is 1 − N/200 bushels of corn. If the price of corn is $1 per bushel and the price of fertilizer is
$.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to
maximize his profits?
a.
320
b.
328
c.
160
d.
84
e.
200
21. In Problem 12, if the price of the output good is $4, the price of factor 1 is $1, and the price of factor 2
is $3, what is the profit-maximizing amount of factor 1?
a.
8
b.
2
c.
1
d.
0
e.
There is not enough information to tell.