Quiz 8

A price taking firm employs each of its inputs into production until its marginal product is equal to 1.

False

Changing the labels on isoquants without changing the shapes of the isoquants implies no change in the underlying technology so long as the ordering of isoquants is preserved.

False

Cobb-Douglas production function have decreasing returns to scale.

False

If producer choice sets are convex and a production plan satisfies the condition that the (marginal) technical rate of substitution is equal (in absolute value) to the ratio of input prices, then the production plan is profit maximizing.

False

Just as indifference maps represent consumer tastes, so isoquant maps represent a producer tastes.

False

Profit is constant along an isoquant.

False

Technologically efficient production plans are also economically efficient.

False

All economically efficient production plans are technologically efficient.

True

Assuming an interior solution, a production plan is profit maximizing if and only if all marginal revenue products are equal to input prices.

True

Assuming convex producer choice sets, the (marginal) technical rate of substitution is equal ( in absolute value) to the ratio of input prices at any profit maximizing production plan.

True

If a production technology has increasing returns to scale throughout, then the marginal cost curve lies below the average cost curve throughout.

True

If production technologies are homothetic, all cost-minimizing production plans lie on the same ray from the origin for a given set of input prices.

True

In 2-input production models, constant returns to scale implies horizontal marginal cost curves.

True

Output prices are irrelevant for a firm as it is calculating its cost curves.

True

Production technologies A and B can have the same-shaped isoquant map, with technology A having decreasing returns to scale and technology B having increasing returns to scale.

True