Question 1

The MRPS is equal to:

Accepted Answer

The answer of The MRPS is equal to:
...

Question 2

The isorevenue line is:

Accepted Answer

The isorevenue line is a line depicting all combinations of two outputs that yield a constant level of revenues. It helps in determining the optimal combination of inputs to maximize revenue.

Question 3

An isorevenue line is:

Accepted Answer

An isorevenue line is linear because it represents combinations of goods that generate the same revenue, assuming constant prices for those goods.

Question 4

If ΔY₂P₂ > ΔY₁/P₁ then:

Accepted Answer

This inequality suggests that the firm's marginal revenue product is greater in Y₂ than in ₁. Therefore, the firm could increase revenue by moving into Y₂.

Question 5

If ΔY₂/ΔY₁ > ΔY₂/ΔY₁ then:

Accepted Answer

The expression ΔY₂/ΔY₁ represents the marginal rate of substitution (MRS) between goods Y and B at the current combination of outputs (Y₁). If this value is less than the MRS between the same goods at a different combination of outputs (Y₂), then it implies that consumers are willing to give up more of one good to obtain an additional unit of the other good at the new combination. This suggests that the firm could increase revenue by moving into Y₂ and producing a combination of goods that reflects this greater willingness to trade off between them.

Question 6

In the real world, agribusiness firms:

Accepted Answer

Agribusiness firms, like any other profit-seeking firms, change their output combinations based on relative prices to maximize their profits. This means that they will produce the mix of products that will generate the highest possible income given the cost of production for each product. Changing output combinations based on managerial skill alone is not a sufficient explanation, and option A is incorrect because firms always have the ability to adjust their production levels. Option D is also incorrect because it does not provide an answer to the question.

Question 7

A change in relative prices will affect the:

Accepted Answer

A change in relative prices affects the isorevenue line because it changes the revenue that can be generated from different combinations of goods, shifting or rotating the isorevenue line. The PPF, MRPS, and rate of technological change are not directly affected by changes in relative prices.

Question 8

Technological change will affect the:

Accepted Answer

Technological change can shift the Production Possibility Frontier (PPF) outward, indicating an increase in the economy's capacity to produce goods and services.

Question 9

A drought in the Midwestern US will affect the:

Accepted Answer

A drought in the Midwestern US will affect the PPF because it will reduce the amount of agricultural output that can be produced.

Question 10

Technological change will shift the PPF:

Accepted Answer

Technological change allows for the production of more goods and services with the same amount of resources, which means the PPF shifts outward, indicating an increase in the possibilities for production.

Question 11

Define the term, "Production Possibilities Frontier."

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The answer of Define the term, "Production Possibilities Frontier."...

Question 12

Define the term, "Isorevenue Line."

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The answer of Define the term, "Isorevenue Line."...

Question 13

Graph the optimal combination of the outputs Y₁ = milk (gal) and Y₂ = cheddar cheese (lb) for a dairy farmer.

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The answer of Graph the optimal combination of the outputs...

Question 14

Demonstrate the impact of a potential increase in the standard of living in the US on the equilibrium quantity of milk and cheese produced and sold by this dairy farmer.

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The answer of Demonstrate the impact of a potential increase...

Question 15

Demonstrate the impact of a (hypothetical) cheese research program in the US Department of Agriculture (USDA) on the optimal output combination.

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The answer of Demonstrate the impact of a (hypothetical) cheese...

Question 16

Derive the mathematical equation that represents the output equilibrium.

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The answer of Derive the mathematical equation that represents the...

Question 17

Suppose that this dairy farmer makes good economic decisions. How does a producer "think like an economist?"

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The answer of Suppose that this dairy farmer makes good...

Question 18

Use graphs to demonstrate a PPF with: 
A. Increasing returns, B. Constant returns, and C. Decreasing returns. Graph and explain a real-world example of each.

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The answer of Use graphs to demonstrate a PPF with:...

Question 19

Define and explain MRPS carefully.

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Question 20

Use graphical analysis to show the impact of the large increase in the price of soybeans on the production of: A. Corn, and B. Soybeans.

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The answer of Use graphical analysis to show the impact...

Quiz 6: Optimal Output Selection