Microeconomics Student Name: Quiz I - Profit Maximization ...

Microeconomics Student Name:
Quiz I - Profit Maximization Student No:

1. A competitive firm produces output using three fixed factors and one variable factor. The firm's
short-run production function is q = 305x - 2x2, where x is the amount of variable factor used.
The price of the output is $2 per unit and the price of the variable factor is $10 per unit. In the
short run, how many units of x should the firm use?

A. 37
B. 150
C. 21
D. 75
E. None of the above.

2. A competitive firm produces a single output using several inputs. The price of output rises by $4
per unit. The price of one of the inputs increases by $2 and the quantity of this input that the firm
uses increases by 8 units. The prices of all other inputs stay unchanged. From the weak axiom of
profit maximization we can tell that

A. the output of the good must have increased by at least 4 units.
B. the inputs of the other factors must have stayed constant.
C. the output of the good must have decreased by at least 2 units.
D. the inputs of at least one of the other factors must have decreased by at least 8 units.
E. the inputs of at least one of the other factors must have increased by at least 8 units.

3. A profit-maximizing competitive firm uses just one input, x. Its production function is q = 4x1/2.
The price of output is $28 and the factor price is $7. The amount of the factor that the firm
demands is

A. 8.
B. 16.
C. 64.
D. 60.
E. None of the above.

4. A profit-maximizing competitive firm uses just one input, x. Its production function is q = 8x1/2.
The price of output is $24 and the factor price is $8. The amount of the factor that the firm
demands is

A. 11.
B. 128.
C. 144.
D. 27.71.
E. None of the above.

Page 1

Microeconomics Student Name:
Quiz I - Profit Maximization Student No:

5. A competitive firm' s production function is f (x1x2 ) = 8x11/ 2 + 4x12/ 2 . The price of factor
1 is $1 and the price of factor 2 is $2. The price of output is $4. What is the profit-maximizing
quantity of output?

A. 304
B. 608
C. 300
D. 612
E. 292

6. Jiffy-pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze
receives in the upcoming election. Sleaze's share of the vote is determined by the number of
slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N +1), where N is
the number of ads. If each ad costs $3,600 approximately how many ads should Jiffy-pol buy in
order to maximize its profits?

A. 3,329
B. 72
C. 1,666
D. 1,702
E. 833

7. 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 $8. How many units of labor will the firm hire?

A. 16
B. 8
C. 4
D. 24
E. None of the above.

8. The production function is given by f (x) = 4x1/2. If the price of the commodity produced is $60
per unit and the cost of the input is $20 per unit, how much profits will the firm make if it
maximizes profits?

A. $1,444
B. $705
C. $720
D. $358
E. $363

Page 2

Answer Key for Test "Profit Max Quiz.tst", 2/22/2006
No. in No. on
Q-Bank Test Correct Answer

19.B.MC 1 1 D
19.B.MC 4 2 A
19.B.MC 9 3 C
19.B.MC 11 4 C
19.B.MC 13 5 A
19.B.MC 18 6 C
19.B.MC 20 7 B
19.B.MC 24 8 C

Page 1