Competition results in the efficient product mix because A) producers are setting MRT equal to minus the price ratio while consumers are setting MRS equal to minus the price ratio ensuring that MRT will equal MRS. B) consumers are on the contract curve. C) the slope of the production possibility frontier will equal the slope […]
The slope of the isoquant tells the firm how much A) output increases when labor increases by one unit. B) output increases when capital and labor are doubled. C) capital must decrease to keep output constant when labor increases by one unit. D) a unit of capital costs relative to the cost of labor. […]
If the cost of labor increases, the isocost line will A) stay the same. B) shift outward in parallel fashion. C) rotate inward around the point where only capital is employed in production. D) shift inward in parallel fashion. ANSWER C
If the isoquants are straight lines or L-shaped, then a cost-minimizing firm will A) not be able to minimize costs. B) find the lowest isocost line touching the relevant isoquant. C) find the highest isocost line touching the relevant isoquant. D) choose not to produce any output. ANSWER B
Economic growth can be depicted as A) a change in the country’s MRS. B) a change in the country’s MRT. C) a shift of the country’s production possibilities frontier to the right. D) a shift of the country’s production possibilities frontier to the left. ANSWER C
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
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. […]
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
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. […]
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
