# Ch9 - Ch9 Student The next 4 questions refer to the...

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Ch9 Student: ___________________________________________________________________________ The next 4 questions 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 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. 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 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, 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. Which of the following is FALSE? A. A change in input prices shifts the isoquant map. B. Convex isoquants mean that the marginal rate of technical substitution decreases as the firm substitutes labor for capital. C. A change in cost shifts the isocost curve. D . At the optimal input choice, the rate at which the firm can substitute labor for capital in production is equal to the rate at which the firm can substitute labor for capital in the market. E. none of the above.

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6. The expansion path shows A. how input prices change as the firm's output level changes. B. how the marginal products change as the firm's output level changes. C. how the cost-minimizing input choices change as the firm's output level changes. D. how the profit-maximizing input choices change as the firm's output level changes. E. how the cost-minimizing input prices change as the firm's output level changes. The next 9 questions refer to the following figure: The price of capital is \$50 per unit. 7. What is the price per unit of labor? A. \$25 B. \$20 C. \$10 D. \$2 8. How many units of labor should the firm use in order to produce 400 units of output at the least cost? A. 100 B. 105 C. 110 D. 115 9. The minimum cost of producing 800 units of output is A. \$6,000. B. \$7,500.
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## This note was uploaded on 01/08/2011 for the course MBA ECON taught by Professor Hamza during the Spring '10 term at Prince Sultan University.

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Ch9 - Ch9 Student The next 4 questions refer to the...

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