Chapter 7 Homework

Refer to the figure. Which point on the graph shows the optimal combination of inputs?

Point B

Read Group 6 Slides on General Equilibrium (4-2-2020) in the "Presentations" folder of our BbLearn. Then refer to the figure. The curve that connects points E, F, and G in the Edgeworth Box illustrates all possible efficient allocations of goods among individuals. What is this curve called?

the contract curve

Then refer to the figure. Assume there are only two individuals in an economy, Karen and James. The slope of the curve is negative, i.e., the only way to increase one person's utility is to decrease another person's utility. Every point along the curve is efficient. All points within the curve are inefficient. What is this curve called?

the utility possibilities frontier

Suppose that the price of labor is $10 and the price of capital is $20. What is the equation of the isocost line corresponding to a total cost of $100?

100 = 10L + 20K

A firm's total cost function is given by the equation: TC = 4000 + 5Q + 10Q2 What is the expression for average variable cost?

5 + 10Q

Which of the following costs always declines as output increases?

Average fixed cost

The short-run marginal cost of production is MC = w/MPL. Based on this equation, which of the following statements is NOT true?

If the marginal product of labor is a concave curve, then the MC curve is also concave.

Which of the following is NOT an expression for the cost minimizing combination of inputs?

MRTS = MPL / MPK

Refer to the figure. Which of the following changes causes the move from A to B?

The price of capital

A firm's expansion path is

a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices.

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of

a fixed cost.

Refer to the figure. The long run cost curve comes from

an expansion path.