Question

1.the curve connecting cost minimizing level of output is : what's the answer and why?

a.typically vertical

b.typically downward sloping

c. always a straight line

d. typically horizontal

e. called firm's expansion path

2.with a production function that exhibits decreasing returns to scale.

a. the average cost curve will cut the marginal cost curve at the marginal cost curve 's minimum.

b.the marginal cost curve will cut the average cost curve at the average cost curve 's minimum.

c.price is always greater than marginal cost

d. average cost will always exceed marginal cost

e. marginal cost will always exceed average cost

3.the distinction between the short and long run is based on:

a.fixed market time of one year

b. price of the output

c.quantity of output sold

d.whether there is time to change all inputs.

e.fixed market time of ten years.

Answer 1

1.Ans: e) called firm's expansion path

Explanation:

An expansion path exhibits cost minimizing level of output where a given level of output is produced with a lowest cost combination of inputs. A given level of output is represented by an iso-quant and a lowest cost combination is represented by iso-cost line. So the curve connecting cost minimizing level of output is called firm's expansion path.

2.Ans: b) the marginal cost curve will cut the average cost curve at the average cost curve 's minimum.

Explanation:

When the marginal cost curve lies below the average cost curve then there will be increasing returns to scale in the production process . But when the marginal cost curve lies above the average cost curve then there will be decreasing returns to scale in the production process. So we can conclude that the marginal cost curve will cut the average cost curve at the average cost curve 's minimum with a production function that exhibits decreasing returns to scale.

3.Ans: d) whether there is time to change all inputs.

Explanation:

The distinction between the short and long run is that in the short run, some fixed factors are available with variable factors in the production process whereas in the long run , all factors of production are variable.