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When marginal cost curve is below an average cost curve, average cost is
Correct answer(s):
- Declining with output
The marginal cost curve
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- Intersects the ATC and AVC at their minimum points
Average fixed cost
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- Declines continuously as output is expanded
Sunk costs are those costs that
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- Are forever lost after they have been paid
If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use
Correct answer(s):
- Less of labor and more of capital
If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use
Correct answer(s):
- Less capital and more labor
For given input prices, isocosts farther from the origin are associated with
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- Higher costs
An isocost line
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- Represents the combinations of K and L that cost the firm the same amount of money
Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are
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- Convex to the origin
The marginal rate of technical substitution
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- Is the absolute value of the slope of the isoquant
The isoquants are normally drawn with a convex shape because inputs are
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- Not perfectly substitutable
An isoquant defines the combination of inputs that yield the producer
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- The same level of output
The average product of labor depends on how many units of
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- Labor and capital are used
The Cobb-Douglas production function is
Correct answer(s):
- Q = KaLb
With a linear production function there is a
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- Perfect substitutable relationship between all inputs
The Leontief production function
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- Implies inputs are used in fixed proportions
The demand for an input is
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- The VMP of the input
The demand for labor by a profit-maximizing firm is determined by
Correct answer(s):
- VMPL = W
It is profitable to hire labor so long as the
Correct answer(s):
- VMPL is greater than wage
The value of marginal product of an input is the value of the
Correct answer(s):
- Output produced by the last unit of an input