ECO100Y5 Lecture Notes - Lecture 8: Marginal Product, Isoquant, Isocost

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In the short run, when at least one factor is fixed, the only way to produce a given output is to adjust the input of the variable factors. In the long run, all factors can be varied so there are many ways to produce. / mpl = pk / pl: the left side of the equation: ratio of mp"s that compare the contribution to the output of the last unit of capital and last unit of labor. The right side: shows how the cost of an additional unit of labour compares to the cost of an additional unit of labour. If these sides are equal, firms do not substitute between k and l. It is determined by the firm"s current technology and by the prices of the factors of production. It is a boundary since the points below it are unattainable, the points on the curve are attainable if sufficient time elapses for all inputs to be adjusted.

Related Questions

1. If a firm experiences economies of scale,

a. it moves up along the long-run average total cost curve.

b. expansion of output becomes more expensive for the firm.

c. the firm can reduce its per-unit cost by producing less.

d. the firm must shut down in the long run.

e. the firm can reduce its per-unit cost by expanding production.

2. The long-run average total- cost curve represents:

a. the maximum cost of producing any level of output when all the factors are fixed.

b. the lowest cost of producing any level of output when all the factors are variable.

c. the maximum cost of producing any level of output when all the factors are variable.

d. the lowest cost of producing any level of output when all the factors are fixed.

e. the lowest cost of producing any level of output when at least one factor fixed.

3. If the average variable cost if falling, then:

a. average fixed cost is rising.

b. marginal cost must be falling.

c. marginal cost must be rising.

d. marginal cost lies below average variable cost.

e. marginal cost lies above the average variable cost.

4. When the marginal-cost curve lies above the average-total-cost curve, the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

a. true

b. false.

5. Demand is price-elastic at the top portion of a straight-line downward-sloping demand curve.

a. true

b. false.

amaranthreindeer392

constant costs

increasing returns to scale

constant returns to scale

isocost curve

decreasing returns to scale

isoquant

diseconomies of scale

long-run average cost

economies of scale

long-run marginal cost

economies of scope

marginal rate of technical substitution

expansion path

short-run expansion path

___A curve that displays all the various combinations of inputs that will produce a given amount of output.

___The rate at which one input is substituted for another along an isoquant.

___Line that shows all the possible combinations of inputs that can be purchased for a given total cost.

___A curve showing all of the cost-minimizing levels of input usage for various levels of output.

___When the usage of all inputs is increased by an equal proportionate amount, output ___increases by exactly the same proportion.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a larger proportionate amount.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a smaller proportionate amount.

___Cost per unit in the long run.

___The change in long-run total cost per unit change in output.

___When long-run average cost falls as output increases.

___When long-run average cost increases with increases in output.

___Long-run average and marginal costs are equal for all levels of output.

___The situation in which the joint cost of producing two goods is less than the sum of the separate costs of producing the two goods.

___Horizontal line showing the cost-minimizing input combinations for various output levels when capital is fixed in the short run.

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36) A firm encountering economies of scale over some range of output will have a:

a) rising long-run average cost curve.

b) falling long-run average cost curve.

c) constant long-run average cost curve.

d) rising, then falling, then rising long-run average cost curve.

37) When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) a violation of the law of diminishing returns.

38) The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:

a) economies of scale.

b) normative economies.

c) diminishing marginal returns.

d) an increasing marginal product of labor.

39) If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) increasing the average total costs.

40) Economies and diseconomies of scale explain why the:

a) short-run average fixed cost curve declines so long as output increases.

b) marginal cost curve must intersect the minimum point of the firm's average total cost curve.

c) long-run average total cost curve is typically U-shaped.

d) short-run average variable cost curve is U-shaped.

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ECO100Y5 Lecture Notes - Lecture 8: Marginal Product, Isoquant, Isocost

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