Ag Economics Ch. 7

The doubling of a firm's feedlot capacity, which results in a doubling of production, is characteristic of:

Constant returns to scale.

Increasing returns to size can:

None of the above.

The production possibilities curve in the current period:

Reflects only the most efficient combinations of two products to generate revenue.

The long run equilibrium of the firm under conditions of perfect competition will occur at that output level where the product price is equal to both the firm's marginal and average total costs

True

The production possibilities curve reflects the different products the business can produce given efficient use of its existing resources.

True

The slope of an isoquant is called the marginal rate of product transformation.

True

The tangency between and iso-cost line and isoquant represents the least cost combination of two inputs.

True

An isoquant reflects the combination of products that minimizes the cost of production.

False

The shape of the long run average cost curve is typically U-shaped in practice.

False

The slope of the production possibilities curve is called the marginal rate of technical substitution.

False

Given the graph of the long run planning curve for a firm below.

Firm size #4 is making an average profit at price P minus SAC4 by operating at Q4.

The long run average cost curve:

Is an envelope of a series of short run average cost curves.

The profit maximizing combination of two products to produce is found where:

The iso-revenue line is tangent to the production possibilities curve.

The iso-revenue curve will shift to the right if:

The level of income increases.

The point of tangency between the iso-cost and the isoquant indicates:

The minimum cost of using these two inputs for a given level of output.

The marginal rate of technical substitution is equal to:

The ratio of the change in capital to the change in labor.

The slope of an iso-revenue line is determined by:

The ratio of the price of the two products

Net income represents the accountant's version of after-tax profits.

True

The iso-revenue line reflects the rate at which the market is willing to substitute between two products as their prices change.

True

The long run average cost curve is also know as the planning curve.

True