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

-Table 7-5 shows short-run total cost figures for a stereo manufacturer.The short-run average variable cost of producing five stereos is

A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This firm is experiencing

-Table 7-4 shows a production relationship.Assuming the labor input is fixed at 4, what will be the optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital?

A change in input prices has no impact on the budget line.

Product indifference curves bow inward toward the origin because of diminishing returns to substitution of inputs.

A firm's production process shows constant returns to scale.It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of

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?

A firm uses two inputs, A and B.At its optimal choice of input proportions,

If MRP > P, a firm should use less of that input.

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?

The firm can calculate all points on its total cost curve if it knows

A firm uses workers and seed to grow lettuce.Its lettuce output rises from 100 tons to 200 tons when the number of workers increases from 25 to 75.Its production process shows

Most firms have very little flexibility in their choice of input proportions.

Differentiate between the short run and the long run.

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

Determining the optimal choice of input combinations generally does not involve

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels.A unit of labor costs $6, and a unit of seed costs $12.The farmer should

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

How long is the long run?