Question 1

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $40 per unit and the price of capital is $1000 per unit.The MP_L equals 24 and the MP_K equals 600.In this situation,

Accepted Answer

The answer of Suppose a firm is using 1500 units...

Question 2

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
  TABLE 8-2
-Refer to Table 8-2.As this firm switches from production method A to production method G,production is

Accepted Answer

Switching from production method A to production method G indicates a shift towards using more capital and less labor, making the production process more capital intensive.

Question 3

Suppose that capital costs $10 per unit and labour costs $4 per unit.If the marginal product of capital is 50 and the marginal product of labour is 50,the firm should ________ in order to minimize its costs of producing its output.

Accepted Answer

The firm should employ less capital and more labour because the marginal product per dollar spent on labour (50/4 = 12.5) is greater than that on capital (50/10 = 5). This indicates that labour is more cost-effective than capital.

Question 4

Suppose that capital costs $50 per unit and labour costs $20 per unit.If the marginal product of capital is 100 and the marginal product of labour is 30,a cost-minimizing firm should

Accepted Answer

The firm should use more capital and less labour. This is because the marginal product of capital (100) is higher than the marginal product of labour (30) which means that using an additional unit of capital will increase output more than using an additional unit of labour. Therefore, the firm can reduce its total cost by substituting more capital for labour.

Question 5

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
  TABLE 8-2
-Refer to Table 8-2.Suppose capital costs $6 per unit and labour costs $4 per unit and the firm is employing production method A.How should this firm adjust its use of capital and labour to minimize costs?

Accepted Answer

The firm should employ more capital and less labour because capital is relatively cheaper than labour.

Question 6

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is twice the MP of capital,and the price of labour is four times the price of capital.In order to minimize its costs,the firm should

Accepted Answer

To minimize costs, the firm should equate the ratio of marginal products to the ratio of input prices. Since the MP of labor is twice that of capital, but labor is four times as expensive, the firm should use more capital and less labor.

Question 7

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 3 and the marginal product of labour is 6,the cost-minimizing firm should

Accepted Answer

The firm should employ less capital and more labour because the marginal product per dollar spent on labour (6/3 = 2) is higher than that on capital (3/6 = 0.5), indicating labour is more cost-effective.

Question 8

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should ________ in order to minimize its production costs.

Accepted Answer

The answer of Suppose a firm employs two kinds of...

Question 9

Suppose capital costs $280 per unit and labour costs $16 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 70,the marginal product of labour must be

Accepted Answer

The answer of Suppose capital costs $280 per unit and...

Question 10

If a firm is using labour and capital such that the MP of labour is two times the MP of capital,and the price of labour is four times the price of capital,the firm should ________ in order to minimize its costs of producing its output.

Accepted Answer

The firm should increase capital and decrease labour because the marginal product per dollar spent on capital is higher than that on labour, indicating that the firm can reduce costs by using more capital and less labour.

Question 11

Suppose that capital costs $100 per unit and labour costs $40 per unit.If the marginal product of capital is 200 and the marginal product of labour is 60,a cost-minimizing firm should

Accepted Answer

The firm should employ more capital and less labour because the marginal product per dollar spent on capital (200/100 = 2) is greater than the marginal product per dollar spent on labour (60/40 = 1.5).

Question 12

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 25 and the MP_K equals 400.In this situation,

Accepted Answer

The answer of Suppose a firm is using 1500 units...

Question 13

Suppose that capital costs $8 per unit and labour costs $4 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 60,the marginal product of labour must be

Accepted Answer

To maximize profits, a firm should choose the combination of capital and labour where the marginal product per dollar spent on each factor is equal.

In this case, the cost of capital is $8 and its marginal product is 60, which means that the marginal product per dollar spent on capital is 60/8 or 7.5.

The cost of labour is $4 and we need to find the marginal product of labour that would also yield a marginal product per dollar spent of 7.5.

Let MPL be the marginal product of labour. Then, the equation would be:

MPL/4 = 7.5

Solving for MPL, we get:

MPL = 4 x 7.5 = 30

Therefore, the marginal product of labour must be 30 for the firm to operate at its optimal factor mix and maximize profits.

Question 14

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 60 and the MP_K equals 1200.In this situation,

Accepted Answer

To determine whether the firm is minimizing its costs, we need to calculate the marginal cost of labour and the marginal cost of capital and compare them to their respective prices. However, since we are not given any information about the prices of the outputs, we cannot make this calculation. The fact that MP_L=60 and MP_K=1200 means that the marginal product of labour (MPL) is increasing at a decreasing rate as more labour is employed, and the marginal product of capital (MPK) is decreasing at an increasing rate as more capital is employed. This implies that the firm is currently using too much labour relative to capital, since the marginal cost of labour is higher than its marginal product, and the marginal cost of capital is lower than its marginal product. Therefore, the firm could lower its production costs by decreasing labour input and increasing capital input, while keeping output constant. This would reduce the marginal cost of labour and increase the marginal cost of capital, leading to a more efficient use of the two inputs. Therefore, the correct answer is C.

Question 15

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is two times the MP of capital,and the price of labour is two times the price of capital.In order to minimize its costs,the firm should

Accepted Answer

The firm is already minimizing costs because the ratio of the marginal products (MP) to their respective prices is equal for both labour and capital.

Question 16

Suppose that capital costs $10 per unit and labour costs $5 per unit.For a profit-maximizing firm operating at its optimal factor mix,if the marginal product of capital is 50,the marginal product of labour must be

Accepted Answer

To maximize profits, the firm must use its factors of production in such a way that the marginal cost of each factor equals its marginal revenue product. That is,
Marginal Product of Capital / Price of Capital = Marginal Product of Labour / Price of Labour
Substituting the given values, we get:
50/10 = MPL/5
This simplifies to MPL = 25. Hence, the answer is C) 25.

Question 17

Suppose capital costs $2000 per unit and labour costs $50 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of labour is 10,the marginal product of capital must be

Accepted Answer

The answer of Suppose capital costs $2000 per unit and...

Question 18

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 12 and the marginal product of labour is 6,the cost-minimizing firm should

Accepted Answer

The answer of Suppose that capital costs $6 per unit...

Question 19

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
  TABLE 8-2
-Refer to Table 8-2.If capital costs $6 per unit and labour costs $4 per unit,which production method minimizes the cost of producing 1000 toys per day?

Accepted Answer

The answer of The following table shows the marginal products...

Question 20

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
  TABLE 8-2
-Refer to Table 8-2.Suppose the firm is employing production method G.How should this firm adjust its use of capital and labour in order to minimize costs?

Accepted Answer

Without the specific details of Table 8-2, such as the costs and productivity of capital and labor in production method G, it is impossible to determine the optimal adjustment for minimizing costs.

Quiz 8: Producers in the Long Run

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $40 per unit and the price of capital is $1000 per unit.The MP_L equals 24 and the MP_K equals 600.In this situation,

The following table shows the marginal products of capital (K) and labour (L) for various methods for Firm ABC to produce 1000 toys per day. TABLE 8-2 -Refer to Table 8-2.As this firm switches from production method A to production method G,production is

Suppose that capital costs $10 per unit and labour costs $4 per unit.If the marginal product of capital is 50 and the marginal product of labour is 50,the firm should ________ in order to minimize its costs of producing its output.

Suppose that capital costs $50 per unit and labour costs $20 per unit.If the marginal product of capital is 100 and the marginal product of labour is 30,a cost-minimizing firm should

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is twice the MP of capital,and the price of labour is four times the price of capital.In order to minimize its costs,the firm should

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 3 and the marginal product of labour is 6,the cost-minimizing firm should

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should ________ in order to minimize its production costs.

Suppose capital costs $280 per unit and labour costs $16 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 70,the marginal product of labour must be

If a firm is using labour and capital such that the MP of labour is two times the MP of capital,and the price of labour is four times the price of capital,the firm should ________ in order to minimize its costs of producing its output.

Suppose that capital costs $100 per unit and labour costs $40 per unit.If the marginal product of capital is 200 and the marginal product of labour is 60,a cost-minimizing firm should

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 25 and the MP_K equals 400.In this situation,

Suppose that capital costs $8 per unit and labour costs $4 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 60,the marginal product of labour must be

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 60 and the MP_K equals 1200.In this situation,

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is two times the MP of capital,and the price of labour is two times the price of capital.In order to minimize its costs,the firm should

Suppose that capital costs $10 per unit and labour costs $5 per unit.For a profit-maximizing firm operating at its optimal factor mix,if the marginal product of capital is 50,the marginal product of labour must be

Suppose capital costs $2000 per unit and labour costs $50 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of labour is 10,the marginal product of capital must be

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 12 and the marginal product of labour is 6,the cost-minimizing firm should

Quiz 8: Producers in the Long Run

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $40 per unit and the price of capital is $1000 per unit.The MPL equals 24 and the MPK equals 600.In this situation,

The following table shows the marginal products of capital (K) and labour (L) for various methods for Firm ABC to produce 1000 toys per day. TABLE 8-2 -Refer to Table 8-2.As this firm switches from production method A to production method G,production is

Suppose that capital costs $10 per unit and labour costs $4 per unit.If the marginal product of capital is 50 and the marginal product of labour is 50,the firm should ________ in order to minimize its costs of producing its output.

Suppose that capital costs $50 per unit and labour costs $20 per unit.If the marginal product of capital is 100 and the marginal product of labour is 30,a cost-minimizing firm should

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is twice the MP of capital,and the price of labour is four times the price of capital.In order to minimize its costs,the firm should

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 3 and the marginal product of labour is 6,the cost-minimizing firm should

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should ________ in order to minimize its production costs.

Suppose capital costs $280 per unit and labour costs $16 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 70,the marginal product of labour must be

If a firm is using labour and capital such that the MP of labour is two times the MP of capital,and the price of labour is four times the price of capital,the firm should ________ in order to minimize its costs of producing its output.

Suppose that capital costs $100 per unit and labour costs $40 per unit.If the marginal product of capital is 200 and the marginal product of labour is 60,a cost-minimizing firm should

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MPL equals 25 and the MPK equals 400.In this situation,

Suppose that capital costs $8 per unit and labour costs $4 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of capital is 60,the marginal product of labour must be

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MPL equals 60 and the MPK equals 1200.In this situation,

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is two times the MP of capital,and the price of labour is two times the price of capital.In order to minimize its costs,the firm should

Suppose that capital costs $10 per unit and labour costs $5 per unit.For a profit-maximizing firm operating at its optimal factor mix,if the marginal product of capital is 50,the marginal product of labour must be

Suppose capital costs $2000 per unit and labour costs $50 per unit.For a profit- maximizing firm operating at its optimal factor mix,if the marginal product of labour is 10,the marginal product of capital must be

Suppose that capital costs $6 per unit and labour costs $3 per unit.If the marginal product of capital is 12 and the marginal product of labour is 6,the cost-minimizing firm should

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $40 per unit and the price of capital is $1000 per unit.The MP_L equals 24 and the MP_K equals 600.In this situation,

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 25 and the MP_K equals 400.In this situation,

Suppose a firm is using 1500 units of labour and 20 units of capital to produce 100 tonnes of mineral ore.The price of labour is $50 per unit and the price of capital is $800 per unit.The MP_L equals 60 and the MP_K equals 1200.In this situation,