# Producers In The Long Run This question bank verified by Studydeets
All Questions
Filter by:
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?

A

B

C

D

Any of the techniques have the same cost.

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?

A

B

C

D

Any of the techniques have the same cost.

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?

A

B

C

D

Any of the techniques have the same cost.

Question 4
Free
Multiple Choice

## TABLE 8-1 -Refer to Table 8-1.Which production technique is obviously technically inefficient?

A

B

C

D

All four techniques are inefficient.

Question 5
Free
Multiple Choice

minimum cost.

maximum output.

maximum profit.

optimal output.

maximum cost.

Question 6
Multiple Choice

## Which of the following conditions indicate cost minimization,assuming two inputs,labour (L)and capital (K)?

PK ∙ MPK = PL ∙ MPL
MPL = MPK
MPK/PK = MPL/PL
MPK/PL = MPL/PK
PK = PL
To unlock the question
Question 7
Multiple Choice

## By expressing the cost-minimizing condition as MPK/MPL = PK/PL,we are able to see

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.
To unlock the question
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

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.
To unlock the question
Question 9
Multiple Choice

## A profit-maximizing firm will increase its use of capital and decrease its use of labour when the

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.
To unlock the question
Question 10
Multiple Choice

## When a firm seeks to minimize costs of producing a given level of output,it does NOT need to know

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.
To unlock the question
Question 11
Multiple Choice

## A cost-minimizing firm will increase its use of labour and decrease its use of capital when the

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.
To unlock the question
Question 12
Multiple Choice

## The principle of substitution plays a central role in resource allocation because it demonstrates that

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.
To unlock the question
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

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.
To unlock the question
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

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.
To unlock the question
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

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.
To unlock the question
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,

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
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

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.
To unlock the question
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

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.
To unlock the question
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,

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
Question 20
Multiple Choice