price theory test 2 part 1 - Assignment Essays

question

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology isa called

answer

A production function

question

Which of the following inputs are variable in the long run?

answer

all of these (plant size, labor, capital and equipment)

question

The short run is

answer

a time period in which at least one input is fixed

question

Writing total output as Q, change in output as <>Q, total employment as L, and change in labor employment as <>L, the marginal product of labor can be written algebraically as

answer

<>Q, <>L

question

When labor usage is at 12 units, output is at 36 units. From this we may infer that

answer

the average product of labor is 3

question

When the average product is decreasing, marginal product

answer

is less than average product

question

The law of diminishing marginal returns applies to

answer

the short run only

question

Refer to figure 6.1. At which point on the total product curve is the average product of labor the highest?

answer

point B

question

An isoquant

answer

is a curve that shows all combinations of inputs that yield the same total output

question

As we move downward along a typical isoquant, the slope of the isoquant

answer

becomes flatter

question

The rate at which one input can be reduced per additional unit of other input, while holding output constant, is measured by the

answer

marginal rate of technical substitution

question

The marginal rate of technical substitution is equal to the

answer

ratio of the marginal products of the inputs

question

A production function in which the inputs are perfectly substitutable would have isoquants that are

answer

linear

question

L L L An examination of the production of isoquants in the diagram below reveals

answer

Capital and Labor will be used in fixed proportions

question

In a production process, all inputs are increased by 10% but output increases less than 10%. This means that the firm experiences

answer

Decreasing returns to scale

question

If input prices are constant, a firm with increasing returns to scale can expect

answer

costs to go up less than double as output doubles

question

Does it make sense to consider the returns to scale of a production function in the short run?

answer

No, we cannot change all of the production inputs in the short run

question

Which of the following statements is true regarding the differences between economic and accounting costs

answer

accounting costs only include explicit costs

question

Foxed costs are fixed with respect to changes in

answer

output

question

Incremental cost is the same concept as__________ cost

answer

marginal

question

The total cost (TC) of producing computer software (Q) is given as TC=200+5Q. What is the total variable cost

answer

question

In a short-run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus marginal cost is

answer

Below average total cost

question

An isocost line reveals the

answer

input combinations that can be purchased with a given outlay of funds

question

when the isocost line is just tangent to an isoquant, we know that

answer

output is being produced at a minimum cost

question

Writing total output at Q, change in output as <>Q, total labor as L, and change in labor employment as <>L, the marginal product of labor can be witten algebraically as

answer

<>Q/<>L

question

The slope of the total product curve is the

answer

Marginal product

question

When the average product is decreasing, the marginal product

answer

is less than the average product

question

The law of diminishing returns applies to

answer

the short run only

question

Assume the average product for six workers is fifteen, if the marginal product of the seventh worker is eighteen

answer

average product is rising

question

An isoquant

answer

is a curve that slows all the combinations of inputs that yield the same total output

question

A straight-line isoquant

answer

Would indicate that capital and labor are perfect substitutes in production

question

Which of the following statements is true regarding the differences between economic and accounting costs?

answer

Accounting costs include explicit costs

question

Fixed costs are fixed with respect to changes in

answer

output

question

The total cost (TC) of producing computer software disks (Q) is given as TC=200+5Q What isthe Marginal cost>

answer

question

Variable Costs are

answer

a production expense that changes with the quanitity of output produced

question

Jim left his previous job making $70,000 a year to start his own business and pay himself $25,000 a year until the business is up and running. What is the economic cost of the time he contributes to his new business

answer

$45,000 a year

question

A firm should hire more labor when the marginal revenue product of labor

answer

equals the wage rate

1 of 37

question

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology isa called

answer

A production function

question

Which of the following inputs are variable in the long run?

answer

all of these (plant size, labor, capital and equipment)

question

The short run is

answer

a time period in which at least one input is fixed

question

Writing total output as Q, change in output as <>Q, total employment as L, and change in labor employment as <>L, the marginal product of labor can be written algebraically as

answer

<>Q, <>L

question

When labor usage is at 12 units, output is at 36 units. From this we may infer that

answer

the average product of labor is 3

question

When the average product is decreasing, marginal product

answer

is less than average product

question

The law of diminishing marginal returns applies to

answer

the short run only

question

Refer to figure 6.1. At which point on the total product curve is the average product of labor the highest?

answer

point B

question

An isoquant

answer

is a curve that shows all combinations of inputs that yield the same total output

question

As we move downward along a typical isoquant, the slope of the isoquant

answer

becomes flatter

question

The rate at which one input can be reduced per additional unit of other input, while holding output constant, is measured by the

answer

marginal rate of technical substitution

question

The marginal rate of technical substitution is equal to the

answer

ratio of the marginal products of the inputs

question

A production function in which the inputs are perfectly substitutable would have isoquants that are

answer

linear

question

L L L An examination of the production of isoquants in the diagram below reveals

answer

Capital and Labor will be used in fixed proportions

question

In a production process, all inputs are increased by 10% but output increases less than 10%. This means that the firm experiences

answer

Decreasing returns to scale

question

If input prices are constant, a firm with increasing returns to scale can expect

answer

costs to go up less than double as output doubles

question

Does it make sense to consider the returns to scale of a production function in the short run?

answer

No, we cannot change all of the production inputs in the short run

question

Which of the following statements is true regarding the differences between economic and accounting costs

answer

accounting costs only include explicit costs

question

Foxed costs are fixed with respect to changes in

answer

output

question

Incremental cost is the same concept as__________ cost

answer

marginal

question

The total cost (TC) of producing computer software (Q) is given as TC=200+5Q. What is the total variable cost

answer

question

In a short-run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus marginal cost is

answer

Below average total cost

question

An isocost line reveals the

answer

input combinations that can be purchased with a given outlay of funds

question

when the isocost line is just tangent to an isoquant, we know that

answer

output is being produced at a minimum cost

question

Writing total output at Q, change in output as <>Q, total labor as L, and change in labor employment as <>L, the marginal product of labor can be witten algebraically as

answer

<>Q/<>L

question

The slope of the total product curve is the

answer

Marginal product

question

When the average product is decreasing, the marginal product

answer

is less than the average product

question

The law of diminishing returns applies to

answer

the short run only

question

Assume the average product for six workers is fifteen, if the marginal product of the seventh worker is eighteen

answer

average product is rising

question

An isoquant

answer

is a curve that slows all the combinations of inputs that yield the same total output

question

A straight-line isoquant

answer

Would indicate that capital and labor are perfect substitutes in production

question

Which of the following statements is true regarding the differences between economic and accounting costs?

answer

Accounting costs include explicit costs

question

Fixed costs are fixed with respect to changes in

answer

output

question

The total cost (TC) of producing computer software disks (Q) is given as TC=200+5Q What isthe Marginal cost>

answer

question

Variable Costs are

answer

a production expense that changes with the quanitity of output produced

question

answer

$45,000 a year

question

A firm should hire more labor when the marginal revenue product of labor

answer

equals the wage rate

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