Exam 8: Producers in the Long Run

The figure below shows the isocost lines and the isoquant map for a firm producing golf tees. FIGURE 8- 6 -Refer to Figure 8- 6. Suppose this firm is producing 4000 golf tees with 10 units of capital and 25 units of labour. The marginal rate of substitution between capital and labour is

Consider a firm that uses only labour and capital. At the present use of labour and capital, the MP of labour is twice the MP of capital, and the price of labour is four times the price of capital. In order to minimize its costs, the firm should

Suppose that a firm is using 100 units of labour and 50 units of capital to produce 200 fax machines 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,

When a cost- minimizing firm is faced with an increase in the relative price of labour, it adjusts its factor usage so as to

FIGURE 8- 4 -Refer to Figure 8- 4. The firm is initially operating at point B. An improvement in technology would be represented by

The figure below shows the isocost lines facing a firm producing golf tees. FIGURE 8- 5 -Refer to Figure 8- 5. Given the information provided about the isocost lines, we know that the per unit price of capital is _ and the per unit price of labour is _ .

For a firm with only two inputs, capital and labour, the condition MPK/MPL = PK/PL guarantees that the firm is

The figure below shows the isocost lines facing a firm producing golf tees. FIGURE 8- 5 -Refer to Figure 8- 5. If the cost- minimizing firm is initially producing at a point on isocost line 1 and then moves to a point on isocost line 3, we can say that

In the long run, a profit- maximizing firm produces any given level of output by choosing the production method that

The long- run average cost (LRAC) curve shows