Micro #3

suppose that the total cost of producing T-shirts ban be represented as TC(q)=50+2q. The AVERAGE COST of the 5th T-shirt is

12

suppose the total cost of producing T-shirts can be represented as TC(q)=50+2q. Tse MARGINAL COST of the 5th t-shirt is

2

when an isocost line is just tangent to an isoquant, we know that

all of the above -the output is being produced at minimum cost -the ratio of marginal products are equal to the ratio of the input prices -MRTS=-w/r

in the short-run, the marginal cost is rising and the average variable cost is falling as output is increased. thus

marginal cost is below average variable cost

For the production function q=f(L,K)=3L+K, the marginal rate of technical substitution (MRTS)

remains constant as the firm substitutes labor for captal

the marginal rate of technical substitution always equals

the ratio of marginal products of inputs

suppose that capital and labor must be kept in a fixed proportion to produce a particular good. for example, digging a trench requires one worker who has one shovel. what does this imply about returns to scale?

there are constant returns to scale

if an isocost line crosses the isoquant twice, a cost minimizing firm will

us a different isocost line to select the bundle of points

suppose a firm's production function is q=f(L,K)=L^1/3 K^1/3. This firm's cost functions exhibits

diseconomies of scale

suppose the marginal revenue from the next unit of output is smaller that the marginal cost of producing it. the firm should

decrease the production level

which of the following statements best summarizes the law of diminishing marginal returns

in the short run, as more labor is hired, output increases at a diminishing rate

if there are diseconomies of scale within a given range of output, which of the following is (are) TRUE?

the long-run average curve must be upward sloping within that range of output