Long-run average cost is never greater than short-run average cost because in the long run, A) capital costs equal zero. B) the firm can move to the lowest possible isocost curve. C) wages always increase over time. D) wages always decrease over time. ANSWER B
Date: September 9th, 2020
Explain why the long-run total cost curve, not the short-run total cost curve, shows the lowest cost of producing any level of output. Is there an exception? What will be an ideal response? ANSWER In the long run, all costs are variable so the firm can select the least-cost mix of all inputs to […]
Date: September 9th, 2020
“If the wage rate paid to one form of labor is twice the cost of another form of labor, the first type of labor must be twice as productive.” Comment. Indicate whether the statement is true or false ANSWER true . Firms minimize cost by setting the ratio of marginal productivity per unit cost […]
Date: September 9th, 2020
At a given point in time, the Rawlsian welfare function gives equal weight to each individual’s utility. Indicate whether the statement is true or false ANSWER False. The Rawlsian welfare function gives a weight of 1 to the utility of the worst-off person and a weight of zero to the utilities of all others. […]
Date: September 9th, 2020
In the short run, the expansion path is A) horizontal. B) vertical. C) diagonal. D) indeterminate. ANSWER A
Date: September 9th, 2020
The Arrow impossibility theorem suggests A) democracies are doomed to fail in the long run. B) dictatorships are impossible in the long run. C) there is no universally applicable decision rule in a majority-rule democracy. D) there is no way to make democracy better than a dictatorship. ANSWER C
Date: September 9th, 2020
Which of the following statements best explains why long-run average cost is never greater than short-run average cost? A) In the long run, tangency of the isocost and isoquant is attainable. This is not necessarily true in the short run. B) In the long run, diseconomies of scale might not occur, but in the short […]
Date: September 9th, 2020
Suppose the production function is q = 12 L0.25K0.75. Determine the long-run capital-to-labor ratio (K/L) if the cost a unit of capital (r) is three times the cost of a unit of labor (w). What will be an ideal response? ANSWER The firm minimizes costs by setting MRTS = w/r. MRTS = MPL /MPLK […]
Date: September 9th, 2020
Equity and efficiency can be achieved simultaneously through competition. Indicate whether the statement is true or false ANSWER False. Equity involves value judgments and achieving it will usually result in lessened efficiency.
Date: September 9th, 2020
Most of the debates in the U.S. Congress center on A) efficiency concerns. B) equity concerns. C) both efficiency and equity equally. D) market inefficiency. ANSWER B
Date: September 9th, 2020
