Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the fixed cost of using 81 units of capital and 9 units of labor is:
A. $2,160.
B. $135.
C. $2,025.
D. There is insufficient information to determine the fixed costs.
Answer: C
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Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is Coke's inverse demand function?
A. QC = (90 - 400PP) - 500PC B. PC = (0.18 + 0.8PP) - 0.002QC C. QC = (490 - 400PC) D. PC = (400 - 500QC)
A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the:
a. interest rate effect. b. monetary theory. c. supply-side theory. d. wealth effect. e. trade effect
Oligopoly pricing differs from pricing in other market structures. The essential difference is
a. relatively high fixed costs associated with oligopoly b. brand loyalty of consumers c. use and effect of advertising d. difference between concentration ratios and HHI e. mutual interdependence of firms
Excess capacity and inefficiency result under monopolistic competition.
Answer the following statement true (T) or false (F)