Question

12. Learning by doing doctrine suggests that: a. MC shifts upward as current output increases b. an increase in this period's output will cause future periods' long-run average cost curves to be lower c. The long-run average cost curve to increase at a smaller output d. the Law of Diminishing Returns to be violated e. none of the above 13. If given quantities of soap and shampoo can be produced together at a lower total cost than they could be produced separately then: a. both production processes must be characterized by economies of scale b. both production processes must be characterized by increasing returns to scale c. there are economies of scope in producing soap and shampoo d. isoquants are right angles e. none of the above 14. If the input measured on the vertical axis is fixed in the short run: a. the short-run expansion path is horizontal b. the short-run expansion path is vertical c. the short-run expansion path is downward sloping d. the short-run expansion path is upward sloping e. the short-run expansion path is strictly concave 15. A widget manufacturer currently employs 20 units of labor and 10 units of capital. The price of a unit of labor is $5 and the price of a unit of capital is $25. One more unit of labor would increase output by 100 while another unit of capital would increase output by 650. This manufacturer could reduce the cost of its current output by: a. reducing labor usage and increasing capital usage b. increasing both labor and capital usage c. reducing both labor and capital usage d. reducing capital usage and increasing labor usage e. the manufacturer is currently minimizing the cost of its output 16. To say that a firm is a price taker means that: a. the firm's demand curve is perfectly inelastic b. the fini's marginal revenue curve is downward sloping c. the firm's average total cost curve is horizontal d. the firm can alter its output without influencing price e. all of the above 17. In a perfectly competitive market, the demand curve facing the firm is: a. identical to the market demand curve b. perfectly elastic even though the market demand curve slopes downward c. unitary elistic even though the market demand curve is inelastic d. down and sloping regardless of the characteristics of the market demand curve

Answer 1

Answer: 12: b. an increase in this period’s output will cause future periods’ long run average cost curves to be lower

According to this doctrine by learning better utilization of factors firm can increase production and decrease cost

Answer: 13: c. there are economies of scope in producing soap and shampoo

Economies of scope means producing goods together to reduce total production cost while there production cost is higher when producing separately

Answer: 14: a. the short run expansion path is horizontal

As only one factor is changing while other is constant

Answer: 15: a. reducing labor usage and increasing capital usage

As using one unit of capital will be increase output by 650 so manufacturer will prefer more capital rather than labor