Exam 7: Technology , Production and Costs

Suppose a firm uses labour and capital to produce output. The last unit of labour hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units. Use the optimal combination of inputs rule to calculate the price of capital if the price of labour is $6 per unit. The price of capital is

The formula for total fixed cost is

The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of

-Refer to Figure 7-11. For output rates greater than 20 000 picture frames per month,

What is an isoquant? What is the slope of an isoquant?

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

-Refer to Figure 7-5. Identify the curves in the diagram.

Describe the relationship between marginal cost and average total cost.

Adam spent $10 000 on new equipment for his small business, 'Adam's Fitness Studio.' Membership at his fitness center is very low and at this rate, Adam needs an additional $12 000 per year to keep his studio open. Which of the following is true?

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

Use the following graph to answer the following questions. a. If the wage rate and the rental price of machines are both $50 and total cost is $800, is the cost-minimising point A, B, or C? b. If the wage rate is $40, the rental price of equipment is $120, and total cost is $1200, is the cost-minimising point A, B, or C? c. If the wage rate is $60, the rental price of equipment is $90, and total cost is $1800, is the cost-minimising point A, B, or C?

In the short run, why does a production function eventually display diminishing returns to labour?

Bill owns 'Bill's Home of Blues' a store that specialises in selling CDs and DVDs of blues musicians of the 1960s and 1970s. Bill took out a loan from his bank to pay for his store and its initial inventory. Bill pays the bank $900 per week for his loan. The $900 bank payment

-Refer to Figure 7-12. The movement from isoquant T to isoquant U depicts

-Refer to Table 7-7. What is the average total cost of production when the firm produces 120 lanterns?

The slope of an isoquant measures

What is the difference between between total costs, variable costs, and fixed costs?

Marginal cost is equal to the

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the