Question 1

If the price of one factor increases, then the firm will find a new least-cost factor combination by shifting its lowest equal-cost line along its same equal-product curve.

Accepted Answer

When the price of one factor increases, the firm will seek a new least-cost combination of factors, which typically involves moving to a different equal-product curve that reflects a new combination of inputs, not merely shifting along the same equal-product curve. This adjustment is made to minimize costs while maintaining the same level of output, if possible, but it involves changing the combination of inputs used.

Question 2

A labor-saving technological improvement will cause firms to move along the production function to more capital-intensive methods.

Accepted Answer

The answer of A labor-saving technological improvement will cause firms...

Question 3

The equal-product curve is a locus of points of constant output which may be produced with varying combinations of inputs.

Accepted Answer

The definition of equal-product curve is accurate and describes a true statement.

Question 4

Any of the following changes may cause the marginal product of labor to shift: an increase in the amount of land used jointly with the labor, a decrease in the amount of capital used jointly, and a change in technology.

Accepted Answer

These changes can affect the marginal product of labor as they influence the factors of production used in conjunction with labor. An increase in joint use of land can lead to an increase in labor productivity, while a decrease in joint use of capital may decrease productivity. Changes in technology can also have a significant impact on the marginal product of labor.

Question 5

Production theory is like consumer theory in that in the former the consumer equates the marginal utilities from each good, while in the latter the firm equates the marginal products from each factor.

Accepted Answer

Production theory is not like consumer theory in the way described in the statement. In production theory, the firm seeks to maximize profits by equating marginal revenue with marginal cost, not marginal product from each factor. In consumer theory, the consumer equates the marginal utility per dollar of each good, not the marginal utility from each good.

Question 6

An increase in the price of any given good will necessarily cause a change in the profit-maximizing employment mix for its production.

Accepted Answer

An increase in the price of a good does not necessarily change the profit-maximizing employment mix, as it depends on other factors like production technology, input costs, and the elasticity of demand for labor.

Question 7

The tangency of an equal-product curve and an equal-cost line determines many points of a firm's total least-cost curve.

Accepted Answer

The tangency of an equal-product curve and an equal-cost line determines a single point of a firm's total least-cost combination of inputs, not many points.

Question 8

It is possible to derive the marginal product curves of both labor and capital from a single production function, specifying the outputs for various combinations of these inputs.

Accepted Answer

Yes, it is possible to derive the marginal product curves of both labor and capital from a single production function by calculating the partial derivative of the production function with respect to each input variable. This gives the marginal product of labor and marginal product of capital curves, which show the additional output that results from adding one more unit of each input, holding all other inputs constant.

Question 9

By supplying the firm with a production-function schedule, an engineer is indicating the various combinations of possible inputs which will produce a series of different possible outputs.

Accepted Answer

The statement accurately describes the purpose of a production-function schedule provided by an engineer.

Question 10

The slope of an equal-cost line is everywhere equal to the ratio of the marginal products of its factors of production.

Accepted Answer

The slope of an equal-cost line (isocost line) is everywhere equal to the negative ratio of the prices of the factors of production, not the ratio of their marginal products.

Quiz 20: Production Cost Theory and Decisions of the Firm