Suppose a society’s PPF for food (F) and clothing (C) can be written as 25 = F2 + C2. If all consumers have the same endowment and the same utility function Ui = Fi Ci, what is the efficient product mix of food and clothing? What will be an ideal response? ANSWER The […]
Date: September 9th, 2020
Assuming that w and r are both positive, if the long-run expansion path is horizontal, then A) MPK = 0. B) MRTS is a function of capital only. C) w = r. D) All of the above. ANSWER B
Date: September 9th, 2020
The long-run average cost curve may initially slope downward due to A) decreasing average fixed costs. B) increasing marginal returns. C) economies of scale. D) All of the above. ANSWER C
Date: September 9th, 2020
At the XYZ Co, a unit of capital costs 3 times as much as a unit of labor. If the isoquants are convex, and the firm does not change its input mix in the long run, we can conclude that A) MPK = 3 MPL. B) the firm will not hire any capital. C) […]
Date: September 9th, 2020
A change in relative factor prices will always result in A) a change in the slope of the isoquants. B) a tangency between the new isocost line and a new isoquant. C) a rotation of the isocost lines. D) All of the above. ANSWER C
Date: September 9th, 2020
Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people. What will be an ideal response? ANSWER One person, when she spends all of her time producing one good or the other, can produce […]
Date: September 9th, 2020
When the isocost line is tangent to the isoquant, then A) MPL = MPK. B) the firm is producing that level of output at minimum cost. C) the firm has achieved the right economies of scale. D) All of the above. ANSWER B
Date: September 9th, 2020
At a perfectly competitive equilibrium with production and trade, the slope of the production possibility curve will be A) equal to the slope of the price line faced by the consumers. B) steeper than the slope of the price line faced by consumers. C) flatter than the slope of the price line faced by consumers. […]
Date: September 9th, 2020
As more producers with differing marginal rates of transformation are added, the joint production possibility curve becomes A) steeper. B) flatter. C) more convex to the origin. D) smoother. ANSWER D
Date: September 9th, 2020
Suppose the marginal cost of a piece of candy is given by MCc = 2Qc and the marginal cost of a desk is MCd = 4 + 4Qd. The current production levels are 20 pieces of candy and 4 desks. The marginal rate of transformation (MRT) is A) MRT = -1. B) MRT = -2. […]
Date: September 9th, 2020
