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
The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely A) economies of scale. B) economies of scope. C) constant returns to scale. D) increasing returns to scale. ANSWER C
Date: September 9th, 2020
Can consumption efficiency be achieved even if the efficient product mix is not achieved? What will be an ideal response? ANSWER Efficiency in consumption implies that all consumers have the same MRS. This can be achieved with any product mix. Thus, consumers can be as well off as possible for any given product mix. […]
Date: September 9th, 2020
If a production function is represented as q = LaKb, the long-run average cost curve will be horizontal as long as A) a + b = 0. B) a + b = 1. C) q > 0. D) L = K. ANSWER B
Date: September 9th, 2020
When the isocost line is tangent to the isoquant, then A) MRTS = -w/r. B) the firm is producing that level of output at minimum cost. C) the last dollar spent on capital yields as much extra output as the last dollar spent on labor. D) All of the above. ANSWER D
Date: September 9th, 2020
Economic growth can be depicted as a A) shift in the contract curve. B) a change in the dimensions of the Edgeworth box. C) a change in the preference curves of individuals. D) a change in the number of people in the Edgeworth box. ANSWER B
Date: September 9th, 2020
A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 and the price of a desk is $12. The marginal cost of candy is given by MCc = 2Qc and the marginal cost of a desk is MCd = 4 + 4Qd. The current production level of candy […]
Date: September 9th, 2020
If an isocost line crosses the isoquant twice, a cost minimizing firm will A) use a different isocost line to select the bundle of inputs. B) use the input bundle associated with the intersection on the higher point of the isoquant. C) use the input bundle associated with the intersection on the lower point of […]
Date: September 9th, 2020
