question
For production functions with decreasing returns to scale, a proportional increase in output...
answer
Requires a more than proportional increase in input
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the marginal product of a variable input is
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the change in the total product that occurs in response to a unit change in the variable input
question
in the long run...
answer
all inputs are variable
question
in a short run production function before diminishing returns set in, both MPL and APL will have:
answer
Positive slopes and MPL will lie above APL
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If climate change starts creating earthquakes, storms, droughts, and all manner of obstacles to production operations, the effects can be shown on effected production function graphs by:
answer
Lowering the short run production function and reducing the numbers on each isoquant
question
if equal amounts of a variable input are sequentially added to the input in a typical production function..
answer
Increments to output will first increase at an increasing rate and then at a decreasing rate
question
Geometrically, the marginal product
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At any point is the slope of the total product curve at that point
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The short-run is defined as that period of time during which:
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One or more inputs cannot be freely varied
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If the contribution to output of an additional unit of the variable input exceeds the average contribution of the variable inputs used...
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The average contribution must rise
question
A fixed input is an input that:
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Cannot be varied in the short-run
question
Returns to scale refers to:
answer
What happens to output when all inputs are varied in some proportion
question
The general rule for allocating a productive resource efficiently across different production activities of the same product, like the taxi company example in class, is to choose the allocation for which the:
answer
Marginal product of the resource is the same in every activity
question
The rate at which one input can be exchanged for another without altering output is called:
answer
The marginal rate of technical substitution
question
A production function for which proportional changes in all inputs leads to a more-than-proportional change in output is said to exhibit...
answer
Increasing returns to scale
question
The law of diminishing returns to an input says that if other inputs are fixed...
answer
Change in output will eventually decrease with increases in the variable input
question
On an isoquant, the MRTS is defined as
answer
| change in K/ change in L | at the relevant point on the isoquant
question
In a graph of short run cost curves, which starts rising first?
answer
The marginal cost curve
question
Geometrically, marginal cost at any level of output may be interpreted as the slope of...
answer
The total cost curve at that level of output
question
Suppose you have the following values for a short-run production process: Q = 20, VC = 100, FC = 600 and MC = 40. Given this, we know that the...
answer
Average cost curve must be increasing
question
Total cost is broken down into two components in the short run...
answer
Variable cost and fixed cost
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When marginal cost is greater than average total cost
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Average total cost must be increasing with output
question
A firm that is trying to produce a given level of output Q0 at the lowest possible cost will..?
answer
Select the input combination at which an isocost line is tangent to the Q0 isoquant
question
The slope of a ray from the origin to a point on the total cost curve is the
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Average total cost of producing the corresponding level of output
question
If the variable cost curve is a straight line, then the
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Marginal cost curve will be horizontal
question
Gravel is made by hand in Nepal, but by machine in the U.S. because
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The relative prices of labor and capital differ so dramatically in the two countries
question
Suppose labor and capital are both used to produce output. In the long run, if the wage rate rises while the rental rate on capital remains unchanged,
answer
The process will become more capital intensive
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The short run total cost of zero output is equal to
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Fixed cost
question
The vertical distance between the average variable cost and average total cost curves
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Decreases as quantity increases
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When costs are at a minimum
answer
The extra output we get from the last dollar spent on an input must be the same for all inputs
question
If the total variable cost curve is a straight line, then the
answer
Total cost curve will also be a straight line
question
The vertical distance between the total variable cost and total cost curves
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Is everywhere equal to total fixed cost
question
Suppose output for a simple production process is given by Q = K+ L, where K denotes capital, and L denotes labor. The price of labor is $2 per unit and the price of capital is $4 per unit. What would be the minimum costs of producing 10 units of output?
answer
$20
question
Assume fixed costs are $470 and labor costs $20 per unit. If the fifth laborer adds 25 units to the short run production output and the sixth laborer adds 20 units to the total output and the firm can hire all the labor it wants at the going wage, we can be sure that
answer
Marginal cost is increasing
question
Assume fixed costs are $470 and labor costs $20 per unit. The first laborer produces 20 units of output. Subsequent hires add 5 units less to production than the previous worker. Thus, the second worker adds 15, the third adds 10, etc. which of the following is a true statement?
answer
Average total cost at an output of 50 is $11
question
Given input prices and the usual strategy of a cost-minimizing firm, optimal production occurs at
answer
The lowest isocost C for a given isoquant Q
question
Which of the following is not true?
o Average fixed costs never increase with output
o Average total costs are always greater than or equal to average variable costs
o Average cost can never rise while marginal costs are declining
o The long-run marginal cost curve is always lower than the firm's short-run marginal cost curves
o Average fixed costs never increase with output
o Average total costs are always greater than or equal to average variable costs
o Average cost can never rise while marginal costs are declining
o The long-run marginal cost curve is always lower than the firm's short-run marginal cost curves
answer
The long-run marginal cost curve is always lower than the firm's short-run marginal cost curves
question
A firm has a total cost function given by C(Y) = 10Y^2 + 1000. At which output is average total cost minimized?
answer
10
question
other things remaining the same, in the long run as compared to the short run
answer
supply elasticity will increase
question
in a competitive industry, the industry's short run supply curve is
answer
the horizontal sum of the marginal cost curves
question
in a TR TC curve if the market demand shifts right, what will happen to the firm
answer
the TR function would rotate upwards
question
the elasticity of supply is given by
answer
change in Q/ change in P times P/Q, P/Q times 1/slope, change in Q/Q divided by change in P/P
question
when TC = TR the firm is
answer
break even
question
suppose that the supply curve is given by P=Q. what is the elasticity of supply?
answer
1
question
Producer surplus is given by the area
answer
above the supply curve but below the price
question
at the output where MC=ATC=P, the firm
answer
has no economic profit
question
profit is maximized for the TC TR curve when
answer
TR is greater than TC
question
profit maximizing output level for a perfectly competitive firm is always where
answer
P=MC
question
if the output price falls below the ATC curve but lies above the ATC, then the firm should
answer
operate in the short run but not the long run
question
if a firm's demand curve falls below its AVC curve, then the firm should
answer
shut down now
question
say a competitive firm is producing at a point where ATC=$10 , AVC=$2. if the firm charges $5 for its output, then in the short run this firm should??
answer
continue to operate
question
monopoly is characterized by
answer
a downward sloping demand curve
question
which of the following would erode the monopoly pricing power of a firm that was controlling a market?
answer
the development of substitutes for the product by other firms
question
which of the following is not a source of a monopoly power?
A)exclusive control over inputs
B)economies of scale
C)patents
D)rapid low cost technological change in the industry
A)exclusive control over inputs
B)economies of scale
C)patents
D)rapid low cost technological change in the industry
answer
rapid low cost technological change in the industry
question
the total revenue curve for a firm is given by TR=2Q
answer
the firm is definitely not a monopolist
question
If a profit-maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce where the demand elasticity is _______ if it will produce at all.
answer
1
question
a profit maximizing monopolist sets output where
answer
MC=MR
question
a profit maximizing monopolist sells output for $100, then we know that its marginal revenue is
answer
less than $100 if it is a single price monopolist
question
the demand equation for a single price monopolist is P=50 - Q. the marginal revenue for this monopolist is
answer
50 - 2Q
question
in second-degree price discrimination it is true that
answer
people who buy a lot pay a lower price
question
a single price monopolist with a positive marginal cost will maximize profit by producing where
answer
demand is price elastic
question
a single price profit maximizing monopolist is inefficient because
answer
the sum of consumer and producer surplus is less than it could be
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