Supplemental Quiz:ECO 202 Supplemental Quiz: Questions & Answers:Latest Updated

ECO 202 Supplemental Quiz: Questions & Answers
Minimizing cost in the long run

1.
If at the current input bundle

MPL / PL < MPK/ PK

the firm can reduce cost by
A) increasing labour, decreasing capital
B) decreasing labour, increasing capital
C) increasing both inputs
D) decreasing both inputs
E) increasing output

Answer: B — capital gives more output per dollar.




2.
At the cost-minimizing point, the MRTS equals
A) PL/PK
B) PK/PL
C) MPL/PL
D) MPK/PKE) 1

Answer: A — MRTS = MPL/MPK = PL/PK.




3.
If isoquants are very “flat,” this indicates
A) labour is very productive relative to capital
B) capital is very productive relative to labour
C) labour and capital are perfect complements
D) diminishing returns to scale
E) fixed proportions

, Answer: B — small MPL relative to MPK.




4.
A technological improvement that raises MPL but not MPK will cause the firm to
A) use more labour and less capital
B) use less labour and more capital
C) use less of both inputs
D) not change input mix
E) increase only capital

Answer: A — labour becomes more productive per dollar.




5.
If both PL and PK double, the cost-minimizing input bundle
A) changes toward more labour
B) changes toward more capital
C) stays the same
D) reduces output
E) increases output

Answer: C — only the isocost shifts, slope unchanged.




6.
If the isoquant is tangent to the isocost at two different points, this implies
A) perfect substitutes
B) perfect complements
C) diminishing MRTS
D) increasing returns to scale
E) diminishing returns to scaleAnswer: A — straight-line isoquants.




7.