ECON-200 Lecture Notes - Lecture 13: Substitute Good, Exxonmobil, Isoquant

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azureprairie-dog22

18 Sep 2020

School

Diablo Valley College

Department

Economics

Course

ECON-200

Professor

Sorce

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Document Summary

In economic terms, the long run represents the shortest period of time necessary to make changes to all the inputs utilized in a production system. It is reasonable to assume that different combinations of inputs would yield different levels of output. We use the term isoquant to denote the various combinations of inputs that would result in a given level of output. An important metric used with isoquants is the marginal rate of technical. Mrts is the rate at which we can exchange one input for another without affecting the total level of output. As a simple example, consider the set of isoquants shown in the diagram. We are looking at two variables or inputs capital and labor. Along the iq1 curve, different combinations of capital and labor result in an output of 100 units. Similarly, along iq2, different combinations (obviously more) of capital and labor result in an output of 200 units.

Related Questions

1. The slope of the total product curve measures

a. the marginal rate of technical substitution.

b. marginal product.

c. average product.

d. the maximum average product.

e. minimum product.

2. The Law of Diminishing Returns to a variable input (such as labor) assumes that

a. there is at least one fixed input.

b. all inputs are changed by the same percentage.

c. the firm is operating in the short run.

d. all inputs are held constant.

e. a and c.

3. An isoquant curve identifies

a. the maximum output possible, given a fixed budget.

b. the different combinations of goods the can be produced, given fixed amounts of inputs.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

d. none of the above.

4. The ratio of total productivity to the total quantity of a variable input being used in production is

a. equal to marginal physical productivity of the input.

b. constant as employment levels of the input vary.

c. equal to average physical productivity of the input.

d. equal to the marginal rate of technical substitution.

1) The supply curve of a perfectly competitive firm is

a) Its entire MC curve

b) The upward-sloping portion of its MC Curve

c) It's MC Curve above shutdown point

d) Its MR Curve

2. The Long Run supply curve in a constant cost industry is

a) Upward sloping and linear

b) Downward sloping and linear

c) Horizontal and linear

d) Concave upwards

3. The curve which shows different combinations of inputs that yield the same level of output, is called

a) An isoquant

b) An isocost curve

c) Production function

d) Production possibility curve

4. When labor used is 12 units and output is 36, then

a) The marginal product of labor is 3

b) The total product of labor is 1/3

c) The average product of labor is 3

d) None of the above

5. Say the average product of 6 workers is 15. If the marginal product of the 7^th worker is 18, then

a) Marginal product is falling

b) Marginal product is constant

c) Average product is rising

d) Average product is falling

6. Which one of the following statements is TRUE?

a) AP_L cuts the MP_L curve from above

b) MP_L cuts the AP_L curve from above, at the maximum point of the AP_L curve

c) Average and marginal product do not intersect

d) AP_L cuts the MP_L curve from below.

7. The MRTS is equal to the

a) The slope of the total product curve

b) Change in output divided by the change in labor

c) Change in output minus the size of capita

d) Ratio of the marginal products of the inputs

silvermallard649

For each of the following assertions, please indicate whether they are true or false. No credit will be given without an explanation as to why your claim is correct.

(a) (4 points) There are two firms: one has production function f (K, L) = K + L and the other has production function f?(K,L) = (K+L)2 ?50. Assertion: These two firms have the same shaped isoquants, but different technology.

(b) (4 points) Assertion: In the short run, if the marginal product of labor curve is decreasing, then it is below the average product of labor curve.

(c) (4 points) A T-shirt company can make 1000 T-shirts with 2 workers and 1 machine. It continues to make 1000 T-shirts if it has more than 2 workers but only 1 machine or 2 workers and more than 1 machine. The company currently produces 1000 shirts per month for its single customer. The price of capital falls, but the firm must still produce 1000 shirts per month. Let all inputs be variable. Assertion: The firm will not hire or fire any workers.

(d) (4 points) A technology firm has a Cobb Douglas production function and measures the marginal rate of technical substitution (MRTSLK) at MPL/MPK = 3. The prices of labor and capital faced by the firm are such that currently W/R = 2. Assertion: The tech firm can lower costs (holding output fixed) by laying off some of its labor force and using more capital.

ECON-200 Lecture Notes - Lecture 13: Substitute Good, Exxonmobil, Isoquant

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