ECON 2350 Lecture Notes - Lecture 2: Isoquant, Substitute Good, Production Function
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30 Nov 2017
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If the production function is f(x, y) x min x, y , then there are constant returns to scale. Ans: true: the economist"s distinction between the long run and the short run captures the idea that quantities of some factor inputs can be varied in the short run but not in the long run. Ans: false. (in the long run, all inputs can be varied: a firm has two variable factors and a production function f(x1, x2) (2x1 4x2)1/2. The technical rate of substitution between x1 and x2 is constant. Ans: a: a firm uses only two inputs to produce its output. Ans: a firm has the production function f(x, y) x3/4 y1/4, where x is the amount of factor x used and y is the amount of factor y used. On a diagram we put x on the horizontal axis and y on the vertical axis.
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The law of eventually diminishing marginal returns: (Points : 1)
a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above
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 |
b. the marginal rate of technical substitution c. equal to MPx/MPy d. all of the above e. none of the above |
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 |
b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above |
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 |
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 |
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) |
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above