Max mpl looking for slope at the product curve l3. At what point do you want to stop hiring where mpl is positive l5. Mrts of l for k: amount of k that can be reduced when one extra unit of labor is used so that q bar is produced. Perfect substitutes: no diminishing mrts {graph in notebook} Sub one input factor for another without loss of productivity, true for every single point along the isoquant. Perfect complements: fixed proportional use of l,k {graph in notebook} Most efficient combination of l,k: kink (the vertex part) of l-shaped functions ---> anywhere. L-shaped isoquants else, the mpl or mpk is zero. Objective of the firm: how to most efficiently q (output): f(l,k) = q. Increasing returns to scale (irs) f (2l , 2k) >2q: q more than doubles due to specialization, q with efficiency characterized by natural monopolies. Decreasing returns to scale (drs) f (2l , 2k) <2q.
a. the ratio of total output to the amount of the variable input used in producing the output b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y d. None of the above
The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)
a. the slope of the isoquant curve b. the marginal rate of technical substitution
c. equal to MPx/MPy
d. all of the above e. none of the above
Marginal revenue product is: (Points : 1)
a. defined as the amount that an additional unit of the variable input adds to the total revenue b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained d. a and b e. a and c
Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)
a. marginal cost b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above
In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)
a. the marginal product of labor (L) is equal to ?1 b. the average product of labor (L) is equal to ?2 c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent d. a and b e. a and c
The short-run cost function is: (Points : 1)
a. where all inputs to the production process are available b. relevant to decisions in which one or more inputs to the production process are fixed c. not relevant to optimal pricing and production output decision facilities d. crucial in making optimal investment decisions in new production facilities e. none of the above
Theoretically, in a long-run cost function: (Points : 1)
a. all inputs are fixed b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions
A linear total cost function implies that: (Points : 1)
a. marginal costs are constant as output increases b. average total costs are continually decreasing as output increases c. a and b d. none of the above
