micro 2

the production function q=L^aK^b

exhibits increasing returns to scale if a+b > a and decreasing returns to scale is a +b <1

the production function q=L+L^aK^b+k

exhibits increasing returns to scale if a+b>1 and decreasing returns to scale if a+b<1

if the production function is represented as q=L^aK^b, the long run average cost curve will be horizontal as long as

a+b=1

if the marginal rate of technical substitution for a cost minimizing firm is 10 and the wage rate for labor is 5 what is the rental rate for capital

.5

when the isocost is tangent to the isoquant then

MRTS=-w/r the firm is producing that level of output at minimum cost the last dollar spent on capital yields as much extra output as the last dollar spent on labor

isoquants that are downward sloping straight lines exhibit

a constant marginal rate of technical substitution

learning by doing is represented by

a decrease in the average total cost curve

the production function q= L+K

always exhibits constant returns to scale

isoquants that are downward sloping straight lines imply that the inputs

are perfect substitutes

in the long run, fixed costs are

avoidable

economic costs of an input include

both implicit and explicit costs

the slope of the isoquant tells the firm how much

capital must decrease to keep output constant when labor increases by one unit

suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. in the long run the firm will experience

constant returns to scale

the long run average cost curve may initially slope downar due to

economies of scale

total cost of purchasing one unit is 50. total cost of producing 2 units is 75. at a production level of 2 units the cost function exhibits

economies of scale

in the short run the expansion path is

horizontal

Q=500L-40/k production function increasing decreasing or constant

increasing

if a firm has constant returns to scale then its expansion path

is a straight line

Isoquants must be thin because we assume production

is efficient

learning by doing will result in

lower long run costs than short run costs

in the long run the expansion path is

not enough information

you would expect to see the strongest effect of learning by doing in industries

producing new product

given labor is on the horizontal axis and capital is on the vertical axis as the price of labor increases the isocost line becomes

steeper

long run averge cost is never greater than short run average cost because in the long run

the firm can move to the lowest possible isocost curve

the steeper an isoquant

the greater is the marginal productivity of labor relative to that of capital

if both the price of labor and capital rise in the same proportion which of the following will occur

the isocost line makes a parallel shift inward

to say that isoquants are convex is to say that

the marginal rate of technical substitution falls as labor increases

why do many people choose to not read manuals included with their new computer

they perceive that learning by doing decreases costs faster than learning by reading

an isoquant represents levels of capital and labor that

yield the same level of output