Suppose two inputs are perfect substitutes. In order to minimize production costs, the producer will simply...
Suppose two inputs are perfect substitutes. In order to minimize production costs, the producer will simply have to employ the cheapest input.
a. True
b. False
Homework Answers
When the two inputs are perfect substitutes,the MRTS = MPL/MPK is constant along the isoquant line so the firm uses the input where the Marginal product of the input is greater than the other one.
The statement is False.
Add Answer to:
Suppose two inputs are perfect substitutes. In order to minimize
production costs, the producer will simply...
If the inputs to a production process are perfect substitutes and the marginal rate of technical...
If the inputs to a production process are perfect substitutes and the marginal rate of technical substitution is equal to the ratio of the prices of the two inputs, the firm can choose from a virtually infinite array of combinations of the two inputs to minimize the costs of producing a given level of output. True False
A firm uses only two inputs to produce its output. These inputs are perfect substitutes. Is...
A firm uses only two inputs to produce its output. These inputs are perfect substitutes. Is it true that this firm must have the constant return to scale? If it is true, show the proof. If not, show a counter example.
Suppose a firm uses two factors of production: males and females. The two factors of production...
Suppose a firm uses two factors of production: males and females. The two factors of production always have different MPs and assume that Wm < Wf and that the firm can hire as many females and males at their wage rates. Also, assume that males and females are not perfect substitutes for each other in production: a. Show on a diagram optimal amount of female and male labor firm would like to employ to minimize costs given q0 (put female...
Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm...
Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm can attain optimal input combination by: (you may choose more than one answer) a) using more a and less b. b) using less a and more b. c) using only a. d) using only b. e) using both the inputs, a and b.
Suppose capital and labour are perfect substitutes in production for clothing: 2 units of capital or...
Suppose capital and labour are perfect substitutes in production for clothing: 2 units of capital or 2 units of labour produce 1 unit of clothing. Suppose capital and labour are perfect complements in production for food: 1 unit of capital and 1 unit of labour produce 1 unit of food. Suppose the economy has an endowment of 100 units of capital and 200 units of labour. Construct the production possibilities frontier for the economy.(Number the intercepts) What is the opportunity...
a) True or false: If goods are perfect substitutes, then the MRS can never equal 1....
a) True or false: If goods are perfect substitutes, then the MRS can never equal 1. Expain. b) Suppose that there are two consumers, A and B, and two goods, X and Y. Also, suppose MRSA MRSB. Explain under what conditions an allocation of X and Y will be Pareto efficient. Be specific,
5. Let the firm's production function be given by y = x1 + x2. Note that the inputs 21 and 2 are perfect substitu...
5. Let the firm's production function be given by y = x1 + x2. Note that the inputs 21 and 2 are perfect substitutes in this production process. Suppose w = 2 and w2 = 1. (a) Derive the conditional factor/input demands and use them to find the long-run cost function for this firm. (b) For these factor prices, derive the firm's long-run supply curve. (c) For these factor prices graph the firm's long-run supply curve. (d) Suppose the price...
Using the data table: Does the data suggest that the two inputs are perfect complements? Explain....
Using the data table:
Does the data suggest that the two inputs are perfect
complements? Explain.
Does the data suggest that the two inputs are Perfect
Substitutes? Explain.
Does the data suggest that the production function is
Cobb-Douglas? Explain.
What type of returns to scale do you observe? Explain.
Complete Table 2.
Assuming that the price of labor is w = 10 and the price of
capital is k=40, use Table 1 to do the following:
Complete Table 3.
If...
Suppose that labor (worker hours) and capital (machine hours) are perfect substitutes in the production of...
Suppose that labor (worker hours) and capital (machine hours) are perfect substitutes in the production of widgets. Each widget can be produced in 20 minutes by a worker or in 15 minutes by a machine. The price of labor is $20 per hour, and the price of capital is $30 per hour. Derive the equation for long-run total cost. a. ???? = 60? b. ???? = 170? / 12 c. ???? = 120? d. ???? = 20? / 3 e....
Choose a,b,c,d icular production process that capital and labor are perfect l. If the 7. Suppose...
Choose a,b,c,d
icular production process that capital and labor are perfect l. If the 7. Suppose in a part substitutes so that three units of labor are equivalent to one unit of capita price of capital is s4 per unit and the price of labor is si per unit, the firm should A) employ capital only B) employ labor only C) use three times as much capital as labor. D) use three times as much labor as capital.
a) True or false: If goods are perfect substitutes, then the MRS can never equal 1. Expain. b) Suppose that there are two consumers, A and B, and two goods, X and Y. Also, suppose MRSA MRSB. Explain under what conditions an allocation of X and Y will be Pareto efficient. Be specific,
5. Let the firm's production function be given by y = x1 + x2. Note that the inputs 21 and 2 are perfect substitutes in this production process. Suppose w = 2 and w2 = 1. (a) Derive the conditional factor/input demands and use them to find the long-run cost function for this firm. (b) For these factor prices, derive the firm's long-run supply curve. (c) For these factor prices graph the firm's long-run supply curve. (d) Suppose the price...
Using the data table:
Does the data suggest that the two inputs are perfect
complements? Explain.
Does the data suggest that the two inputs are Perfect
Substitutes? Explain.
Does the data suggest that the production function is
Cobb-Douglas? Explain.
What type of returns to scale do you observe? Explain.
Complete Table 2.
Assuming that the price of labor is w = 10 and the price of
capital is k=40, use Table 1 to do the following:
Complete Table 3.
If...
Choose a,b,c,d
icular production process that capital and labor are perfect l. If the 7. Suppose in a part substitutes so that three units of labor are equivalent to one unit of capita price of capital is s4 per unit and the price of labor is si per unit, the firm should A) employ capital only B) employ labor only C) use three times as much capital as labor. D) use three times as much labor as capital.
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