Exam 8: Producers in the Long Run

The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes. FIGURE 8-3 -Refer to Figure 8-3.What is the difference between the SRATC curves and the LRAC curve?

The slope of an isoquant measures

Suppose a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day.The price of labour is $5 per unit and the price of capital is $2 per unit.The MP_L equals 5 and the MP_K equals 2.In this situation,the firm

FIGURE 8-1 -Refer to Figure 8-1.Which of the four firms in the figure is displaying constant returns to scale at all output levels?

Suppose that capital costs $8 per unit and labour costs $4 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 60,the marginal product of labour must be

For many firms the LRAC curve is U-shaped.The downward-sloping portion of the LRAC curve can be explained by

Consider the short-run and long-run cost curves for a firm.If factor prices decrease,

The principle of substitution plays a central role in resource allocation because it demonstrates that

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 ________.

Refer to Figure 8-6.At each of points A,C,E and G on the isoquant map we know that

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

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

Which of the following paired concepts are equivalent to each other?

Economists collect and analyze data on output per worker and output per hour of work.What are they trying to measure by doing so?

Canada has a much lower population density than does Japan.Therefore,the price of land (relative to the price of labour)is lower in Canada than in Japan.Consider a Canadian firm and a Japanese firm,both producing rice,both having access to the same technologies,and both striving to minimize their costs.The Canadian firm will use the two inputs,land and labour,in such a way that its land/labour ratio is

Consider a firm in the long run that is trying to maximize its profits.It should

A firm's long-run average cost curve

Refer to Figure 8-6.Suppose this firm is producing 3000 golf tees and is at point F on the isoquant map.Which of the following is true?

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 3 and the marginal product of labour is 6,the cost-minimizing firm should

What is meant by the term "increasing returns to scale"?