Microeconomics Quiz 11
Refer to Cost of Production. The short-run average cost of producing 60 units of output per week is
$5 per unit
The short run is any period of time less than one year, while the long run refers to a period of time one year or more in length.
False
When labor is the only variable input in the short run, average variable cost equals the wage rate times the average product of labor.
False
How are a firm's short-run and long-run average cost curves related?
The SRAC curve is tangent to and lies above the LRAC curve.
In deriving the marginal product of labor, we consider the increase in output of an additional worker using additional capital
false
Refer to Cost of Production. The long-run total cost of producing 60 units of output per week is
$270
If marginal cost rises when output is increased, then the average cost of production is also rising
False
Output is held fixed along an isocost.
False
A point on the firm's expansion path both minimizes the cost of producing a given output level and maximizes the output obtained for a given expenditure level.
True
All points on the expansion path have the same marginal rate of technical substitution.
True
The marginal cost curve crosses
both the average cost curve and the average variable cost curve at their bottoms.
If the wage rate is $10 per hour and the rental rate is $5 per hour, then the vertical intercept of the isocost line
can not be determined without more information.
If a firm can adjust its employment of all inputs, then it is
in the long run
Suppose a firm doubles its employment of all inputs in the long run. If this action more than doubles the amount of output produced, then this firm is experiencing
increasing returns to scale
The set of all baskets of inputs that can be employed at a given cost defines a(n)
isocost curve
All points on the firm's expansion path
minimize the firm's cost of producing some level of output
If the marginal rate of technical substitution of labor for capital (MRTSLK) exceeds the relative price of labor in terms of capital (PL/PK), then
the firm needs to use less capital and more labor to reach its expansion path
A firm is currently producing 200 units of output using 60 hours of labor and 80 hours of capital. The marginal product of labor is 12 units of output per hour, and the marginal product of capital is 15 units of output per hour. If the wage rate is $6 per hour and the rental rate is $3 per hour, then
the firm should use more capital and less labor
The marginal rate of technical substitution of labor for capital (MRTSLK) tends to be higher
the larger the quantity of capital already employed
When input prices are fixed, decreasing returns to scale implies that the long-run average cost curve is
upward sloping