Microeconomics Quiz 11

Refer to Cost of Production. The short-run average cost of producing 60 units of output per week is

$5 per unit

The short run is any period of time less than one year, while the long run refers to a period of time one year or more in length.

False

When labor is the only variable input in the short run, average variable cost equals the wage rate times the average product of labor.

False

How are a firm's short-run and long-run average cost curves related?

The SRAC curve is tangent to and lies above the LRAC curve.

In deriving the marginal product of labor, we consider the increase in output of an additional worker using additional capital

false

Refer to Cost of Production. The long-run total cost of producing 60 units of output per week is

$270

If marginal cost rises when output is increased, then the average cost of production is also rising

False

Output is held fixed along an isocost.

False

A point on the firm's expansion path both minimizes the cost of producing a given output level and maximizes the output obtained for a given expenditure level.

True

All points on the expansion path have the same marginal rate of technical substitution.

True

The marginal cost curve crosses

both the average cost curve and the average variable cost curve at their bottoms.

If the wage rate is $10 per hour and the rental rate is $5 per hour, then the vertical intercept of the isocost line

can not be determined without more information.

If a firm can adjust its employment of all inputs, then it is

in the long run

Suppose a firm doubles its employment of all inputs in the long run. If this action more than doubles the amount of output produced, then this firm is experiencing

increasing returns to scale

The set of all baskets of inputs that can be employed at a given cost defines a(n)

isocost curve

All points on the firm's expansion path

minimize the firm's cost of producing some level of output

If the marginal rate of technical substitution of labor for capital (MRTSLK) exceeds the relative price of labor in terms of capital (PL/PK), then

the firm needs to use less capital and more labor to reach its expansion path

A firm is currently producing 200 units of output using 60 hours of labor and 80 hours of capital. The marginal product of labor is 12 units of output per hour, and the marginal product of capital is 15 units of output per hour. If the wage rate is $6 per hour and the rental rate is $3 per hour, then

the firm should use more capital and less labor

The marginal rate of technical substitution of labor for capital (MRTSLK) tends to be higher

the larger the quantity of capital already employed

When input prices are fixed, decreasing returns to scale implies that the long-run average cost curve is

upward sloping