Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash.The hockey team's decision must have been based on the expectation that

The rule that states that the marginal revenue product equal to price does not hold when there are more than two inputs.

Table 7-2 Plastic (in pounds) 5 6 7 Widgets 14 17 19 -Table 7-2 contains information on widget production.The marginal physical product of the sixth pound of plastic is ____.

When economies of scale exist,

Figure 7-12 -Which of the graphs in Figure 7-12 shows a marginal physical product curve that exhibits first increasing, and then diminishing, marginal returns to sunlight?

If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on labor than originally planned and less on tools.How long can he continue this switch in spending? Why?

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

If economies of scale exist for a particular production relationship, long-run average costs will

Figure 7-10 -In Figure 7-10, the curve B is

Total fixed cost falls as output expands.

Table 7-2 Plastic (in pounds) 5 6 7 Widgets 14 17 19 -Table 7-2 contains information on widget production.The average physical product of the seventh pound of plastic is calculated as ____.

A firm's optimal input proportions may change if

Figure 7-1 -Of the graphs in Figure 7-1, which best represents marginal physical product?

A change in input prices will change the location of the budget line.

The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.

In the short run,

Figure 7-8 -Of the graphs in Figure 7-8, which represents fixed cost?

The "law" of diminishing returns

If the price of one input changes, the firm will change its use of that input only.

In the short run, a firm has fixed costs but never any variable costs.