Exam 20: Production Cost Theory and Decisions of the Firm

Production theory is like consumer theory in that in the former the consumer equates the marginal utilities from each good, while in the latter the firm equates the marginal products from each factor.

The slope of an equal-cost line is everywhere equal to the ratio of the marginal products of its factors of production.

A labor-saving technological improvement will cause firms to move along the production function to more capital-intensive methods.

Use the following to answer questions : Figure 7A-2 -At Q = 100 in Figure 7A-2, to be producing at least cost, the ratio of (marginal productivity of land)/(marginal productivity of labor)must be:

Use the following to answer questions : Figure 7A-2 -In Figure 7A-2 the shift in the total cost curve from AB to AC was caused by:

Identify the incorrect answer.If the price of each of the two factors used in production is a constant, then the least-cost principle is satisfied when the:

An increase in the price of any given good will necessarily cause a change in the profit-maximizing employment mix for its production.

The tangency of an equal-product curve and an equal-cost line determines many points of a firm's total least-cost curve.

The least-cost combination of inputs for a specified output:

Any of the following changes may cause the marginal product of labor to shift: an increase in the amount of land used jointly with the labor, a decrease in the amount of capital used jointly, and a change in technology.