ECON CHAPTER 5

15. Which of the following sets of economic data is minimizing the cost of producing a given level of output?

A. MPL = 20, MPK = 40, w = $16, r = $32.

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use:

A. less capital and more labor.

For given input prices, isocosts closer to the origin are associated with:

A. lower costs.

The absolute value of the slope of the isoquant is the:

A. marginal rate of technical substitution.

The marginal rate of technical substitution:

B. is the absolute value of the slope of the isoquant.

With a linear production function there is a:

B. perfect substitutable relationship between all inputs.

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:

B. that input's price falls.

Given the production function Q = min {4K, 3L}, what is the average product of capital when 8 units of capital and 16 units of labor are used?

C. 4

Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?

C. 7

2. Suppose the production function is Q = min {K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?

C. 8

The change in total output attributable to the last unit of an input is the:

C. marginal product.

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 4, and MPK = 40 the firm:

C. should use more K and less L to cost minimize.

Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed?

A. 3

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

C. should use more L and less K to cost minimize.

The demand for labor by a profit-maximizing firm is determined by:

D. VMPL = W.

The combinations of inputs that produce a given level of output are depicted by:

D. isoquants.

Suppose the w = $20 and r = $30. The isocost line for a firm in this industry is:

K = 0.033C − 0.66L.

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

he marginal products of all inputs are equal.

You have been hired to replace the manager of a firm that used only two inputs, capital and labor, to produce output. The firm can hire as much labor as it wants at a wage of $5 per hour and can rent as much capital as it wants at a price of $50 per hour. After you look at the company books, you learn that the company has been using capital and labor in amounts that imply a marginal product of labor of 50 and a marginal product of capital of 100.

not maxing labor reduce capital and hire labor mpl 50 / w5 = 10 mpk=100/r50 = 2