Producers In The Long Run
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- Economic Issues and ConceptsEconomic Theories,Data,and GraphsDemand,Supply,and PriceElasticityPrice Controls and Market EfficiencyConsumer BehaviourProducers in the Short RunProducers in the Long RunCompetitive MarketsMonopoly,cartels,and Price DiscriminationImperfect Competition and Strategic BehaviourEconomic Efficiency and Public PolicyHow Factor Markets WorkLabour Markets and Income InequalityInterest Rates and the Capital MarketMarket Failures and Government InterventionThe Economics of Environmental ProtectionTaxation and Public ExpenditureWhat Macroeconomics Is All AboutThe Measurement of National IncomeThe Simplest Short-Run Macro ModelAdding Government and Trade to the Simple Macro ModelOutput and Prices in the Short RunFrom the Short Run to the Long Run: The Adjustment of Factor PricesLong-Run Economic GrowthMoney and BankingMoney,Interest Rates,and Economic ActivityMonetary Policy in CanadaInflation and DisinflationUnemployment Fluctuations and the NairuGovernment Debt and DeficitsThe Gains From International TradeTrade PolicyExchange Rates and the Balance of Payments
Question 1
Free
Multiple Choice
TABLE 8-1
-Refer to Table 8-1.If the price of labour is $5 and the price of capital is $10,which production technique minimizes the costs of producing 1000 units of output?
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A
B
C
D
Any of the techniques have the same cost.
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Question 2
Free
Multiple Choice
TABLE 8-1
-Refer to Table 8-1.If the price of labour is $10 and the price of capital is $5,which production technique minimizes the costs of producing 1000 units of output?
Choose correct answer/s
A
B
C
D
Any of the techniques have the same cost.
Check answer
Question 3
Free
Multiple Choice
TABLE 8-1
-Refer to Table 8-1.If the price of both labour and capital is $10,which production technique minimizes the costs of producing 1000 units of output?
Choose correct answer/s
A
B
C
D
Any of the techniques have the same cost.
Check answer
Question 4
Free
Multiple Choice
TABLE 8-1
-Refer to Table 8-1.Which production technique is obviously technically inefficient?
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A
B
C
D
All four techniques are inefficient.
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Question 5
Free
Multiple Choice
When there is no other way of producing a given level of output with a smaller total value of inputs,the firm is operating at
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minimum cost.
maximum output.
maximum profit.
optimal output.
maximum cost.
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Question 6
Multiple Choice
Which of the following conditions indicate cost minimization,assuming two inputs,labour (L)and capital (K)?
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PK ∙ MPK = PL ∙ MPL
MPL = MPK
MPK/PK = MPL/PL
MPK/PL = MPL/PK
PK = PL
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Question 7
Multiple Choice
By expressing the cost-minimizing condition as MPK/MPL = PK/PL,we are able to see
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how the firm determines its profit-maximizing output.
how the firm can adjust the marginal products of the factors of production to the prices of the factors given by the market.
that the capital-labour ratio is fixed.
that the ratio of factor prices is constant over time.
that the firm is producing at a lower cost if the left-hand side of the equation is greater than the right-hand side.
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Question 8
Multiple Choice
For a firm with only two inputs,capital and labour,the condition MPK/MPL = PK/PL guarantees that the firm is
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at its profit-maximizing output but is not necessarily minimizing its costs.
minimizing its costs but is not necessarily maximizing its profits.
technically efficient but not economically efficient.
economically efficient but not technically efficient.
at its profit-maximizing and cost-minimizing level of output.
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Question 9
Multiple Choice
A profit-maximizing firm will increase its use of capital and decrease its use of labour when the
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marginal product of capital is higher than the marginal product of labour.
marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour.
average product of capital is higher than the average product of labour.
total product of capital is higher than the total product of labour.
marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour.
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Question 10
Multiple Choice
When a firm seeks to minimize costs of producing a given level of output,it does NOT need to know
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the available alternative methods of production.
the level of output that maximizes its profits.
the cost of the factors of production it uses.
its production function.
how its costs change as its production methods change.
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Question 11
Multiple Choice
A cost-minimizing firm will increase its use of labour and decrease its use of capital when the
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marginal product of capital is higher than the marginal product of labour.
marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour.
average product of capital is higher than the average product of labour.
total product of capital is higher than the total product of labour.
marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour.
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Question 12
Multiple Choice
The principle of substitution plays a central role in resource allocation because it demonstrates that
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firms will find it profitable to make abundant use of relatively scarce factors.
methods of producing the same commodity will not differ from one country to another.
firms can use all factors of production interchangeably with no impact on their costs.
prices will be relatively low for those factors for which demand is high relative to supply.
relative factor prices reflect relative scarcities of factors in the economy and so firms will find it profitable to make abundant use of relatively abundant factors.
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Question 13
Multiple Choice
Suppose a firm employs two inputs,X and Y,and that at their current levels of use MPX/PX > MPY/PY.To minimize the cost of production,the firm should hire
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more input Y and less input X.
more input X and less input Y.
more input Y only if its price falls.
more input X only if its price increases.
more input X only if its price decreases.
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Question 14
Multiple Choice
When a cost-minimizing firm is faced with an increase in the relative price of labour,it adjusts its factor usage so as to
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increase the marginal product of capital relative to the marginal product of labour.
increase the marginal product of labour relative to the marginal product of capital.
use more labour per unit of output than before.
use more of both capital and labour per unit of output.
maintain the previous usage of labour.
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Question 15
Multiple Choice
Suppose a firm is employing labour (L)and capital (K)such that MPK/MPL = PK/PL.If the price of labour rises,the cost-minimizing firm should then
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employ more labour and less capital because MPK/MPL > PK/PL.
employ more capital and less labour because MPK/MPL > PK/PL.
employ more labour and less capital because MPK/MPL < PK/PL.
employ more capital and less labour because MPK/MPL < PK/PL.
do nothing.
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Question 16
Multiple Choice
Suppose a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day.The price of labour is $10 per unit and the price of capital is $5 per unit.The MPL equals 2 and the MPK equals 5.In this situation,
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the firm is minimizing its costs.
the firm should increase the use of both inputs.
the firm could lower its production costs by decreasing labour input and increasing capital input.
the firm could lower its production costs by increasing labour input and decreasing capital input.
the firm should decrease the use of both inputs.
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Question 17
Multiple Choice
Suppose a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day.The price of labour is $5 per unit and the price of capital is $2 per unit.The MPL equals 5 and the MPK equals 2.In this situation,the firm
Choose correct answer/s
is minimizing its costs.
should increase the use of both inputs.
could lower its production costs by decreasing labour input and increasing capital input.
could lower its production costs by increasing labour input and decreasing capital input.
should decrease the use of both inputs.
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Question 18
Multiple Choice
Consider a firm that uses only labour and capital as inputs.At the present use of labour and capital,the MP of labour is four times the MP of capital,and the price of labour is twice the price of capital.In order to minimize its costs,the firm should
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substitute capital for labour until their marginal products are equal.
decrease both capital and labour.
decrease capital and increase labour.
increase both labour and capital.
stay at its present factor mix.
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Question 19
Multiple Choice
Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $40 per unit and the price of capital is $1000 per unit.The MPL equals 25 and the MPK equals 750.In this situation,
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the firm is minimizing its costs.
the firm should increase the use of both inputs.
the firm could lower its production costs by decreasing labour input and increasing capital input.
the firm could lower its production costs by increasing labour input and decreasing capital input.
the firm should decrease the use of both inputs.
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Question 20
Multiple Choice
Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $20 per unit and the price of capital is $1000 per unit.The MPL equals 25 and the MPK equals 750.In this situation,
Choose correct answer/s
the firm is minimizing its costs.
the firm should increase the use of both inputs.
the firm could lower its production costs by decreasing labour input and increasing capital input.
the firm could lower its production costs by increasing labour input and decreasing capital input.
the firm should decrease the use of both inputs.
To unlock the question