1. A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

                       a. the marginal products of the inputs are constant.

                       b. it does not allow the firm to substitute capital for labor.

                       c. the firm could produce positive levels of output at zero cost.

                       d. both b and c

                       e. all of the above

2. Which of the following is an estimable form of a production function?

                       a. Q = f(L,K)

                       b. Q = f(L )

                       c. Q= ak3L3 + bk2L2

                       d. all of the above

                       e. none of the above

3. Which of the following represents a short-run cubic production function?

                    a.  Q= ak3L3 + bk2L2

                    b.  Q = 3AL2 + 2BL(where A = aK3, B = bK2)

                    c.  Q = AL2 + BL2(where A = aK3, B = bK2)

                   d.  Q = AL2 + BL(where A = aK3, B = bK2)

                   e. all of the above

4. What is a problem with using a production function of the form Q = aK + bL (a> 0, b> 0)?

                 a. MRTS is constant.

                b. A positive output can be produced when one input is not used.

                c. The marginal products of the inputs do not have diminishing marginal returns.

                d. both a and b

                e. all of the above

5. With a cubic production function of the form , in order for the average and marginal product functions to have their theoretical properties, it must be the case that

                   a. a< 0, b> 0

                   b. a> 0, b< 0

                   c. a< 0, b< 0

                   d. a> 0, b> 0

6. When estimating a short-run production function of the form  , it is necessary to specify in the computer routine that

                  a. A< 0.

                  b. B> 0.

                  c. the intercept term is forced to equal zero.

                 d. a and b

                 e. all of the above

7. When estimating a short-run average variable cost function,

               a. the intercept must be forced to equal zero.

               b. the cost data must be deflated.

               c. at least one input must have been constant during the period in which the data were collected.

               d. both b and c

               e. all of the above

8. An average variable cost function is estimated as

Which of the following cost functions is associated with this estimate?

                 a. SMC = 96 – 4Q + 0.1Q2

                 b. TVC = 96Q– 2Q2 + 0.05Q3

                 c. TVC = 96Q + 4Q2 + 0.15Q3

                 d. SMC = 96 – 4Q + 0.15Q2

                 e. both b and d

9. A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ2, is

                a. a> 0, b> 0, c> 0

                b. a> 0, b< 0, c> 0

                c. a> 0, b> 0, c< 0

                d. a> 0, b< 0, c< 0

10. A potential problem with cross-section cost data is that

                 a. nominal cost data include the effect of inflation.

                 b. different firms face different input prices.

                 c. at least one input is fixed over time.

                 d. both a and b

                  e. none of the above