Managerial Economics Quiz 1: 15 March 2026 (January 2026 term)

For the production function q = 4K1/2 + 4L

A firm can always trade three units of labour for one unit of capital and still keep output constant. The production technology for this firm can most suitably represented by

A firm finds that it requires exactly two full-time workers to operate each piece of machinery in the factory. The production technology for this firm can most suitably represented by

The marginal product of capital is defined as

If marginal costs equal average total costs

When average product is decreasing in labor, marginal product is greater than average product.

When average product is increasing in labor, marginal product is less than average product.

When average product APL is at a maximum, then marginal product is equal to average product

A chair manufacturer hires its assembly-line labour for $15 an hour and calculates that the rental cost of its machinery is $30 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.

If the firm is currently using 3 hours of machine time for each hour of labour time, is it minimizing its costs of production? _____________

A chair manufacturer hires its assembly-line labour for $15 an hour and calculates that the rental cost of its machinery is $30 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.

If not, what will be the optimal combination of labour and capital.
L* = ________

A chair manufacturer hires its assembly-line labour for $15 an hour and calculates that the rental cost of its machinery is $30 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.

If not, what will be the optimal combination of labour and capital.
K* = __________

Consider two goods, coconut and fish with prices Pc = 20 and Pf = 10. Robin has an income I= 1000 and he consumes only these two goods. With the help of the plot of his budget line taking fish on the Y-axis.
Based on the above data, answer the given subquestions.

The slope of the budget line is

Consider two goods, coconut and fish with prices Pc = 20 and Pf = 10. Robin has an income I= 1000 and he consumes only these two goods. With the help of the plot of his budget line taking fish on the Y-axis.
Based on the above data, answer the given subquestions.

Intercepts on the axis are

Consider two goods, coconut and fish with prices Pc = 20 and Pf = 10. Robin has an income I= 1000 and he consumes only these two goods. With the help of the plot of his budget line taking fish on the Y-axis.
Based on the above data, answer the given subquestions.

If keeping income unchanged, price of the coconut is halved, what will be the new slope of the budget line

Consider two goods, coconut and fish with prices Pc = 20 and Pf = 10. Robin has an income I= 1000 and he consumes only these two goods. With the help of the plot of his budget line taking fish on the Y-axis.
Based on the above data, answer the given subquestions.

New intercepts on the axis are

Consider two goods, coconut and fish with prices Pc = 20 and Pf = 10. Robin has an income I= 1000 and he consumes only these two goods. With the help of the plot of his budget line taking fish on the Y-axis.
Based on the above data, answer the given subquestions.

If income is halved keeping the original prices unchanged

The marginal product of labour in the production of chips is 50 kg chips per hour. The marginal rate of technical substitution of hours of labour for hours of machine capital is 1/4.
What is the marginal product of capital in kg per hour? (only write the no.) __________

The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output.
Based on the above data, answer the given subquestions.

What is the company’s fixed cost? ________

The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output.
Based on the above data, answer the given subquestions.

If the company produced 100 units of goods, what would be its average variable cost? ___________

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Your explicit costs include

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Our implicit cost will be

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $200 for these cases. You have a deal with your grocers that they will pay you $0.5 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $125 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
What is the opportunity cost of filling this order in $ (i.e., selling these cartons to the fraternity)? __________

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $200 for these cases. You have a deal with your grocers that they will pay you $0.5 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $125 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
Should you sell the Fritos to the fraternity? ________