Exam 6: Production and Cost Analysis in the Long Run

All else constant,a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm's production process.

All else constant,an increase in the level of competition among firms would be expected to reduce the amount of X-inefficiency that exists in a particular industry.

Which of the following would have the least amount of influence on a manager's choice of which inputs to employ in a production process?

Why are isoquants negatively sloped?

Diseconomies of scale are illustrated graphically by an upward shift of the firm's long-run average cost curve.

The marginal rate of technical substitution (MRTS)along an isoquant:

Economists describe short-run decisions as "constrained" decisions,while long-run decisions are described as "planning" decisions.Referring to a firm's short-run average cost function and long-run average cost function,explain this distinction.

Which of the following would cause a firm's LRAC curve to shift up?

Assume that as a firm expands its scale of operation,the minimum point of its short-run average total cost curve is unchanged.In this case,we would say that the firm is experiencing diseconomies of scale.

All else constant,an improvement in technology at each scale of operation would cause:

"Learning by doing" results in decreased average costs of production and is illustrated by a downward shift of the firm's long-run average cost curve.

The technique that estimates long-run costs and the minimum efficient scale by determining the scale of operation at which most firms in an industry are concentrated is called the:

All else constant,as the price of petroleum increases relative to the prices of other inputs to the production process,in their effort to minimize their total costs of production,we can expect to see firms employ:

All else constant,an increase in the price of labor would cause the total amount of output that can be produced with a fixed amount of spending to ________.This would result in a movement to a ________ isoquant.

If the inputs to a production process are perfect substitutes and the marginal rate of technical substitution is equal to the ratio of the prices of the two inputs,the firm can choose from a virtually infinite array of combinations of the two inputs to minimize the costs of producing a given level of output.

The use of surveys of experts to estimate long-run production costs may be undermined by the fact that:

Economies of scale are illustrated by:

Consideration of the minimum efficient scale of operation would suggest that,to minimize production costs,the market should be served by a large number of small firms when the LRAC curve slopes downward over the relevant range of output.

A labor-intensive method of production is one that:

In which of the following situations would the minimum efficient scale of operation provide little or no guidance regarding how many firms should serve the market to minimize production costs?