ECON 341 HW 9

Refer to the following figure. The price of capital is $50 per unit: Picture The minimum cost of producing 800 units of output is

$ 7,500.

In the following graph, the price of capital is $12 per unit. If the price of labor is $30 per unit, the lowest possible cost of producing 200 units of output is Picture

$1,200.

In the graph below, the price of capital is $500 per unit. Between 30,000 and 50,000 units of output, how much does each additional unit of output add to long-run total cost? Picture

$1.50

Following is a firm's expansion path. The price of capital is $5 per unit; the price of labor is $2 per unit. Picture When output is 30 units, what is long-run total cost?

$105

Refer to the following graph. The price of labor is $3 per unit: Picture What is the minimum cost of producing 100 units of output?

$105

Refer to the following graph. The price of capital (r) is $20. Picture What is the price of labor (w)?

$30

In the following graph, the price of capital is $100 per unit; the price of labor is $25 per unit. When output is 20 units, what is AVERAGE cost? Picture

$350

Following is a firm's expansion path. The price of capital is $5 per unit; the price of labor is $2 per unit. Picture How much does the 10th unit of output add to long-run total cost?

$4

Refer to the following figure. The price of capital is $50 per unit: Picture What is the marginal rate of technical substitution at each cost minimizing equilibrium point?

0.40

If the price of labor is $5 and the price of capital is $10, what is the marginal rate of technical substitution at the optimal input choice?

0.5

A cow will produce 8500 lbs. of milk if fed either 5000 lbs. of hay and 6200 lbs. of grain or 5600 lbs. of hay and 5400 lbs. of grain. Over this range, the marginal rate of technical substitution between hay and grain is

0.75.

In the graph below, the price of capital is $500 per unit. At point A, the firm can exchange Picture

1 unit of capital for 5 units of labor and keep output unchanged.

In the following graph, the price of capital is $100 per unit. If a firm decides that total cost must not exceed $3,500, what is the maximum amount of output it can produce? Picture

1,000

Refer to the following graph. The price of capital (r) is $20. Picture At the optimal combination of inputs for producing 14,000 units of output, what is the marginal rate of technical substitution?

1.5

In the graph below, the price of capital is $500 per unit. Given a total cost of $50,000, the maximum amount of output possible is Picture

10,000 units of output.

In the following graph, the price of capital is $12 per unit. If the price of labor increases to $40 per unit and total cost is unchanged, what is the maximum amount of output the firm can produce? Picture

100 units of output

Refer to the following figure. The price of capital is $50 per unit: Picture How many units of capital should the firm use to produce 800 units of output at least cost?

102

Refer to the following figure. The price of capital is $50 per unit: Picture Which of the following combinations of capital and labor lies on the expansion path?

130K, 175L

Refer to the following graph. The price of capital (r) is $20. Picture What combination of K and L should the firm choose to produce 14,000 units of output at the lowest cost?

90K, 60L

Which of the following statements is true?

In the long run a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio.

A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. In equilibrium,

MPL will be 5 times MPK.

The expansion path

all of the above

If a firm is producing the level of output at which short-run average cost equals long-run average cost, then

both a and b

Which of the following are characteristics of a typical isoquant?

both a and b

Diseconomies of scale

exist when long-run average cost increases as output increases.

Picture Given the above graph, the marginal rate of technical substitution at point A is

greater than 0.25.

If the price of labor rises relative to the price of capital, the cost-minimizing ratio of capital usage to labor usage (i.e., the ratio K/L) will

increase.

Economies of scale exist when

long-run average cost decreases as output increases.

The expansion path shows how

the cost-minimizing input choices change as the firm's output level changes.

Refer to the following graph. The price of capital (r) is $20. Picture What is the lowest possible cost at which 14,000 units of output can be produced?

$3,600

In the following graph, the price of capital is $100 per unit; the price of labor is $25 per unit. How much does the seventh unit of output add to total cost? Picture

$400

In the graph below, the price of capital is $500 per unit. When output is 10,000 units, what is long-run average cost? Picture

$5

Refer to the following graph. The price of labor is $3 per unit: Picture What is the price per unit of capital?

$5.00

Refer to the following graph. The price of labor is $3 per unit: Picture What is the marginal rate of technical substitution at point B?

0.6

In the following graph, the price of capital is $100 per unit. How many units of capital should a firm use in order to produce 500 units of output at the least cost?

12 units of capital

The slope of an isoquant is

all of the above

Picture In the above graph, as you move from point B to point C,

cost is unchanged.

Suppose that when a firm increases output by 50%, long-run total cost increases by less than 50%. The firm will experience

economies of scale

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that

long-run average cost decreases as more is produced.

If a firm is producing the level of output at which long-run average cost equals long-run marginal cost, then

long-run average cost is at its minimum point.

You read a story in the newspaper about the "economies of mass production." This means that

long-run average cost is less at larger levels of production.

Long-run total cost

represents the lowest possible cost of producing a given level of output.

The marginal rate of technical substitution is

the rate at which the firm can substitute labor for capital while holding output constant.

In the following graph, the price of capital is $100 per unit. What is the marginal rate of technical substitution at point C? Picture

none of the above

In the graph below, the price of capital is $500 per unit. Which of the following combinations of capital and labor lies on the expansion path? Picture

none of the above

Picture Given the above graph, what is the marginal rate of technical substitution at point A?

none of the above

Refer to the following figure. The price of capital is $50 per unit: Picture How many units of labor should the firm use in order to produce 400 units of output at the least cost?

100

Picture In the above graph, what is the marginal rate of technical substitution at point D?

less than 1.5

Refer to the following graph. The price of capital (r) is $20. Picture Why wouldn't the firm choose to produce 5,000 units of output with the combination at A?

none of the above

Which of the following is FALSE?

A change in input prices shifts the isoquant map.

Picture In the above graph, the shift from I to II was due to

a decrease in the price of capital.

In the long run

a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio.

Picture Given the above graph, as you move from input combination A to input combination C,

both a and b

Refer to the following graph. The price of capital (r) is $20. Picture Why wouldn't the firm choose to produce 5,000 units of output with the combination at B?

both a and b

Picture Given the above graph, as you move from point A to point B,

both a and c

Which of the following is (are) characteristics of an isocost curve?

both a and c

Economies of scale exist when

both b and c

Economies of scope in the production of goods G and W exist if

both b and c

A firm is using 50 units of labor and 100 units of capital to produce 2,000 units of output. The price of labor is $200 per unit and the price of capital is $100 per unit. At these input levels, another unit of labor adds 400 units to output and another unit of capital adds 600 units to output. The firm

both c and d

A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. Beginning at A, if the producer increases expenditures on labor by $1 and decreases expenditures on capital by $1, then

cost remains constant and output decreases by 8 units.

A sofa manufacturer currently is using 50 workers and 30 machines to produce 5,000 sofas a day. The wage rate is $200 and the rental rate for a machine is $1,000. At these input levels, another worker adds 200 sofas, while another machine adds 500 sofas. If the firm uses 45 workers and 31 machines instead, then its

cost will be unchanged, and its output will decrease by 500 units.

Learning economies differ from economies of scale because

the former involves cumulative production and the latter involves rate of production per period.

Refer to the following graph. The price of capital (r) is $20. Picture What is the lowest possible cost of producing 5,000 units of output?

$1,800

A firm is using 500 units of labor and 100 units of capital to produce 100 units of output. The price of labor is $5 per unit and the price of capital is $20 per unit. At these input levels, another unit of labor adds 50 units of output, while another unit of capital adds 400 units of output. The firm could increase output by

10 units by spending $1 more on capital and $1 less on labor.

Refer to the following graph. The price of labor is $3 per unit: Picture How many units of labor should a firm use in order to produce 100 units of output at the least cost?

10 units of labor

In the following graph, the price of labor is $15 per unit. Which of the following combinations of capital and labor lies on the expansion path? Picture

18K, 40L

In the following graph, the price of capital is $100 per unit. Which of the following combinations of capital and labor lies on the expansion path? Picture

20K, 60L

In the following graph, the price of capital is $12 per unit. How many units of labor should the firm use in order to produce 200 units of output at the least cost? Picture

22 units of labor

In the following graph, the price of labor is $15 per unit. How many units of labor should a firm use to produce 2,000 units of output at the least cost? Picture

50

Refer to the following graph. The price of capital (r) is $20. Picture If, at the optimal combination of inputs for producing 14,000 units of output, the marginal product of capital is 40, what is the marginal product of labor?

60

If there are no fixed costs in the long run, how can it be said that economies of scale arise from spreading fixed costs over more units of output?

Costs of quasi-fixed inputs get spread over more units of output which drives down average cost in the long run.

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last printing press added 50 books to total output. The publishing house

could produce the same number of books at a lower cost by using more printers and fewer printing presses.

A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm

could produce the same output at a lower cost by using less capital and more labor.

Following is a firm's expansion path. The price of capital is $5 per unit; the price of labor is $2 per unit. Picture When output is 20 units, what is long-run average cost?

none of the above

In the following graph, the price of labor is $15 per unit. The minimum cost of producing 1,000 units of output is: Picture

none of the above

Refer to the following figure. The price of capital is $50 per unit: Picture What is the minimum cost of producing 400 units of output?

$5,000

In the following graph, the price of capital is $100 per unit; the price of labor is $25 per unit. When output is 30 units, what is TOTAL cost? Picture

$10,000

Refer to the following figure. The price of capital is $50 per unit: Picture What is the minimum cost of producing 1,200 units of output?

$10,000

Refer to the following figure. The price of capital is $50 per unit: Picture What is the price per unit of labor?

$20

Refer to the following figure. The price of capital is $50 per unit: Picture How many units of labor should the firm use to produce 1,200 units of output at least cost?

175

Refer to the following graph. The price of labor is $3 per unit: Picture Refer to the following graph. The price of labor is $3 per unit:

18 units of capital

In the graph below, the price of capital is $500 per unit. How many units of labor should a firm use in order to produce 30,000 units of output at the lowest possible cost? Picture

300 units of labor

Refer to the following graph. The price of capital (r) is $20. Picture What combination of labor (L) and capital (K) can produce 5,000 units of output at lowest cost?

60K, 20L

A firm is using 500 units of labor and 100 units of capital to produce 100 units of output. Labor costs $5 per unit and capital $20 per unit. At these input levels, another unit of labor adds 5 units of output, while another unit of capital adds 40 units of output. If the firm uses 496 units of labor and 101 units of capital instead, what will happen?

Cost will be unchanged, and output will increase by 20 units.

A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. Beginning at A, if the producer increases labor by one unit and decreases capital by 1 unit, then

output remains constant and cost increases by $8.

A dry cleaner currently has 10 workers and 4 machines. The workers' wage rate is $300 per worker and the rental rate for a machine is $500. The last worker added 600 units to total output and the last machine also added 600 units to total output, and the last machine also added 600 units to total output. If the dry cleaner uses 11 workers and 3 machines instead, then

output will be unchanged and cost will decrease by $200.

A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. The producer

should use more capital and less labor.

If the marginal rate of technical substitution of labor for capital is 6, the price of labor is $18, and the price of capital is $9, then the firm

should use more labor and less capital.

Picture Given the above graph, if the firm continues to produce 45 units of output and moves from pointA to pointB, it must be true that

the price of labor decreased relative to the price of capital.