Econ 302 Test 2 - Concepts Questions With Verified Answers

Substitutes.... When the price of Y increases then X goes higher.. - Answer Are they complements or subs? X = M+Py/2Px When Py gets bigger, than X gets higher so this means they are Only can add the exponents when they are being multiplied... if you are adding them then you must plug them in ... if they more than double after plugging in then it is increasing returns to scale. - Answer Other side The s-t run average cost curve reveals nothing regarding returns to scale. - Answer A firm's short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale. The firm will use the one with the lower costs - Answer If two different fuel sources (e.g., coal and natural gas) are perfect substitutes in the long-run production of energy. How will a profit-maximizing firm choose between these two inputs? Positive - Answer 12) Some economists conduct empirical research on the theory of the firm by measuring the degree of technical efficiency achieved by actual firms. What type of research contributions are provided by these studies? The isoquant gets flatter as we increase labor. This means that it is harder to replace capital with labor the more labor/less capital that the firm has. - Answer Other Side E - Answer Which always increase(s) as output increases?A) Marginal Cost onlyB) Fixed Cost onlyC) Total Cost onlyD) Variable Cost onlyE) Total Cost and Variable Cost Closer and Closer together - Answer With increasing returns to scale, isoquants for unit increases in output become The marginal product of labor is three times the marginal product of capital - Answer With its current levels of input use, a firm's MRTS is 3... This implies less than twice as much of all inputs are required to double output - Answer Increasing returns to scale in production mean would indicate that capital and labor are perfect substitutes in production - Answer A straight-line isoquant growth in capital stock and technological change... NOT the standard of living. - Answer An important factor that contributes to labor productivity growth is... Constant returns to scale with rising input prices - Answer Which scenario below would lead to lower profits as we double the inputs used by the firm the addition to total output due to the addition of one unit of all other inputs - Answer The marginal product of an input is.. MC AC, so cost-output elasticity is less than one - Answer When there are economies of scale Other Side - Answer Fixed-Proportion Production System = Complements Output - Answer Fixed Costs are fixed with respect to changes in Total Costs and VC - Answer Which always Increase(s) as output increases ATC is positive and constant, ATC equals MC... NOT.. MC is less than ATC - Answer In the short run, suppose average total costs is a straight-line and marginal cost is positive and constant. Then, we know that Input combinations that can be purchased with a given outlay of funds - Answer An isocost line reveals the Isoquants have negative slope - Answer A firm uses two factors of production. Irrespective of how much of each factor is used, both factors always have positive marginal products which imply that the optimal capital-labor ratio remains the same - Answer Suppose our firm produces chartered business flights with capital (planes) and labor (pilots) in fixed proportion (i.e., one pilot for each plane). If the wage rate paid to the pilots increases relative to the rental rate of capital for the airplanes, then: Technology - Answer a production function assumes a given The slopes of the isoquant and isocost curves are equal Costs are minimized for the production of a given output The marginal rate of Technical Substitution equals the rato of input prices - Answer At the optimum combination of two inputs There is at least one fixed input - Answer The law of diminishing returns assumes that Zero or Undefined - Answer The MRTS for isoquants in a fixed-proportion production function is Infinite - Answer If a factory has a short-run capacity constraint, the marginal cost of production becomes... at the capacity constraint Ratio of the marginal products of inputs - Answer The MRTS is equal to the