Quiz 5
When there are economies of scope between two products which are separately produced by two firms, merging into a single firm can
Accomplish a reduction in costs
It is profitable to hire labor so long as the
VMPL is greater than wage
Which of the following "costs" could a firm that wants to remain in business avoid if it halted current production?
Variable costs
The difference between average total costs and average variable costs is
Average fixed cost
Average fixed cost
Declines continuously as output is expanded
When marginal cost curve is below an average cost curve, average cost is
Declining with output
Two firms producing identical products may merge due to the existence of:
Economies of scale
If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use
Less labor and more capital
Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use
More capital and less labor
The isoquants are normally drawn with a convex shape because inputs are
Not perfectly substitutable
An isocost line
Represents the combinations of K and L that cost the firm the same amount of money
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:
Should use more K and less L to cost minimize
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?
The marginal product per dollar spent on all inputs is equal
In the short run, the marginal cost curve crosses the average total cost curve at
The minimum point of the average total cost curve