Question

riod's output will cause future periods' long-run average cost curves to be lower 12 Learning by doing doctrine suggests that: MC shifts upward as current output increases b. an increase in this period's output 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 sham be produced separately then: both production processes must be characterized by economies of scale both production processes must be characterized by increasing retums to scale there are economies of scope in producing soap and shampoo d. isoquants are right angles e. none of the above sities of soap and shampoo can be produced together at a lower total cost than they could dry erase 14 If the input measured on the vertical axis is fixed in the short in 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 firm'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

Answer 1

12) b

Learning by doing increases labor productivity and increases output.

13) c

Economies of scope refers to decrease in average cost when two goods are produced together.

14) a

Short run expansion path is horizontal.

15) a

MPL/MPK= 100/650= 0.15

w/r= 5/25= 0.2

Use less labor and more capital

16) d

The firm has no control over price.