Chapter _9 Quiz KEY

# Chapter _9 Quiz KEY - Chapter#9 QUIZ Questions 1-4 refer to...

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Chapter #9 QUIZ Questions 1-4 refer to the following: A producer is hiring 20 units of labor and 6 units of capital (bundle A ). The price of labor is \$10, the price of capital is \$2, and at A , the marginal products of labor and capital are both equal to 20. 1. Beginning at A , if the producer increases labor by one unit and decreases capital by 1 unit, then C a. Cost remains constant and output increases by 20 units. b. Cost remains constant and output decreases by 20 units. ___ c. Output remains constant and cost increases by \$8. d. Output remains constant and cost decreases by \$8. e. Both cost and output remain constant. 2. Beginning at A, if the producer increases expenditures on labor by \$1 and decreases expenditures on capital by \$1, then A a. Cost remains constant and output decreases by 8 units. b. Cost remains constant and output increases by 12 units. ____ c. Cost remains constant and output increases by 20 units. d. Output remains constant and cost increases by \$8. e. Output remains constant and cost decreases by \$2. 3. The producer C a. Is using the optimal combination of capital and labor. b. Should use more labor and less capital. ___ c. Should use more capital and less labor. d. Cannot determine without more information. 4. In equilibrium, C a. MP L will be less than 20. b. MP K will be more than 20. ___ c. MP L will be 5 times MP K . d. a and b e. None of the above 5. Suppose that when a firm increases its usage of all inputs by 100%, output increases by less than 100%. The firm's production function exhibits

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A a. Decreasing returns to scale. b.
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Chapter _9 Quiz KEY - Chapter#9 QUIZ Questions 1-4 refer to...

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