Question 1

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be

Accepted Answer

The answer of  Refer to the given data. If...

Question 2

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

Accepted Answer

The firm is currently minimizing costs because the ratio of the marginal product of labor to the price of labor (25/5) is equal to the ratio of the marginal product of capital to the price of capital (40/8), both equaling 5. This indicates that the firm is allocating resources efficiently according to the principle of cost minimization.

Question 3

A cost-minimizing firm using two inputs, x and y, will employ inputs so that

Accepted Answer

A cost-minimizing firm will employ inputs such that the marginal product per dollar spent on each input is equal, which is represented by the condition MP x/ Pₓ = MP y / Pᵧ.

Question 4

A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour, and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output, the firm should use

Accepted Answer

The answer of A firm is producing 100 pencils per...

Question 5

Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50, and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should

Accepted Answer

The answer of Suppose that the production of wheat requires...

Question 6

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be

Accepted Answer

The answer of  Refer to the given data. If...

Question 7

A firm is producing with the least-cost combination of resources when the

Accepted Answer

The least-cost combination of resources occurs when the last dollar spent on each resource yields the same marginal product. This is because, in such a scenario, the firm is allocating its budget in a way that equalizes the marginal benefit (in terms of additional output) per dollar spent across all inputs, ensuring cost efficiency.

Question 8

A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table.  To achieve an optimal factor mix for its current output, the firm should employ more

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The answer of A firm operating in purely competitive product...

Question 9

Assume that a purely competitive firm uses two resources, labor (L)and capital (C), to produce a certain product. In which situation would the firm be maximizing profit?

Accepted Answer

The answer of Assume that a purely competitive firm uses...

Question 10

The profit-maximizing and the least-cost combination of inputs are

Accepted Answer

Maximizing profits for a firm involves choosing a combination of inputs that produces a given output at the lowest possible cost, which inherently means selecting the least-cost combination of inputs. This approach ensures that the firm is operating efficiently by minimizing costs while producing the desired level of output, thereby maximizing profits.

Question 11

A firm combines two resources, A and B, to produce an output, Q. Their respective marginal revenue products are $30 and $21. A costs $15 a unit and B $7 a unit. To reduce the cost of Q,

Accepted Answer

The firm should use more of resource B and less of resource A because the marginal revenue product (MRP) of B ($21) is higher than its cost ($7), indicating it is underutilized, while the MRP of A ($30) is twice its cost ($15), suggesting a more balanced use. By adjusting the use of resources to better align the MRP with their costs, the firm can reduce the cost of producing Q.

Question 12

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose?

Accepted Answer

The answer of The price of capital is $12 per...

Question 13

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of b, then the

Accepted Answer

The answer of  Refer to the diagram. If a...

Question 14

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

Accepted Answer

The new capital will replace labor because it offers a higher marginal product per unit of cost (MP/P) than labor, making it a more cost-effective option for firms, thereby reducing their overall costs.

Question 15

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors Pₗ = $4 and P_c = $3. What is the profit-maximizing combination of L and C for the firm?

Accepted Answer

The answer of A purely competitive firm in the factor...

Question 16

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of c, then the

Accepted Answer

The answer of  Refer to the diagram. If a...

Question 17

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

Accepted Answer

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest Average Total Cost (ATC) for that output. This involves minimizing the cost of production inputs to achieve cost efficiency while maintaining the desired level of output.

Question 18

If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when

Accepted Answer

The least-cost combination of resources A and B is achieved when the marginal product per dollar spent on each resource is equalized across all resources, which is represented by MP of A/price of A = MP of B/price of B. This ensures that the firm is allocating its budget in a way that maximizes the total output derived from its inputs.

Question 19

The introduction of automatic elevator equipment allowed firms to handle the movement of people in a multistory building at less cost, thus decreasing the demand for elevator operators. The best explanation for this change is that the

Accepted Answer

The introduction of automatic elevator equipment made it more cost-effective than employing elevator operators because the ratio of the marginal product to its price for the equipment was higher than that for the operators, indicating a more efficient use of resources.

Question 20

Refer to the diagram. The production of Q ₁ units of output at an average cost of a

Accepted Answer

The answer of  Refer to the diagram. The production...

Quiz 16: The Demand for Resources

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

A cost-minimizing firm using two inputs, x and y, will employ inputs so that

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be

A firm is producing with the least-cost combination of resources when the

A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table. To achieve an optimal factor mix for its current output, the firm should employ more

Assume that a purely competitive firm uses two resources, labor (L) and capital (C) , to produce a certain product. In which situation would the firm be maximizing profit?

The profit-maximizing and the least-cost combination of inputs are

A firm combines two resources, A and B, to produce an output, Q. Their respective marginal revenue products are $30 and $21. A costs $15 a unit and B $7 a unit. To reduce the cost of Q,

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose?

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of b, then the

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors Pₗ = $4 and P_c = $3. What is the profit-maximizing combination of L and C for the firm?

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of c, then the

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when

The introduction of automatic elevator equipment allowed firms to handle the movement of people in a multistory building at less cost, thus decreasing the demand for elevator operators. The best explanation for this change is that the

Refer to the diagram. The production of Q ₁ units of output at an average cost of a

Quiz 16: The Demand for Resources

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, the firm's economic profits will be

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

A cost-minimizing firm using two inputs, x and y, will employ inputs so that

Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be

A firm is producing with the least-cost combination of resources when the

A firm operating in purely competitive product and resource markets uses three resources, A, B, and C, whose prices and productivities at current output levels are given in the table. To achieve an optimal factor mix for its current output, the firm should employ more

Assume that a purely competitive firm uses two resources, labor (L) and capital (C) , to produce a certain product. In which situation would the firm be maximizing profit?

The profit-maximizing and the least-cost combination of inputs are

A firm combines two resources, A and B, to produce an output, Q. Their respective marginal revenue products are $30 and $21. A costs $15 a unit and B $7 a unit. To reduce the cost of Q,

The price of capital is $12 per machine-hour, and the price of labor is $3 per hour. The table gives production schedules for a firm, showing the possible combinations of capital and labor that will produce 100 units of output. Which combination will this cost-minimizing firm choose?

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of b, then the

What happens when technological advance makes available a new highly productive capital good for which MP/P is greater than that of labor for which it is a substitute resource?

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors Pₗ = $4 and Pc = $3. What is the profit-maximizing combination of L and C for the firm?

Refer to the diagram. If a firm produces output Q ₁ at a unit cost of c, then the

The "least-cost combination of resources" to produce a given amount of output means that the output is produced at the lowest

If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when

The introduction of automatic elevator equipment allowed firms to handle the movement of people in a multistory building at less cost, thus decreasing the demand for elevator operators. The best explanation for this change is that the

Refer to the diagram. The production of Q ₁ units of output at an average cost of a

A purely competitive firm in the factor and product markets sells its output for $1 and pays factors Pₗ = $4 and P_c = $3. What is the profit-maximizing combination of L and C for the firm?