Question Details

The combinations of inputs costing a constant C dollars is 



1.	The Cobb-Douglas production function is:  Q = 1.4*L0.6*K0.5.  What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%? 
[HINT: %∆Q = (EL * %∆L) + (EK * %∆K)]
a.	%∆Q = + 3.0%
b.	%∆Q = + 5.0%
c.	%∆Q = - 0.70%
d.	%∆Q = - 2.50%
e.	%∆Q = - 5.0%

	 

2.	If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?  
a.	The firm should use relatively more capital 
b.	The firm should use relatively more labor
c.	The firm should not make any changes - they are currently efficient
d.	Using the Equimarginal Criterion, we can’t determine the firm- efficiency level
e.	Both c and d

	

	3.	The marginal rate of technical substitution may be defined as all of the following except:
a.	the rate at which one input may be substituted for another input in the production process, while total output remains constant
b.	equal to the negative slope of the isoquant at any point on the isoquant
c.	the rate at which all combinations of inputs have equal total costs
d.	equal to the ratio of the marginal products of X and Y
e.	b and c


	

	4.	The law of diminishing marginal returns:
a.	states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns
b.	is a mathematical theorem that can be logically proved or disproved
c.	is the rate at which one input may be substituted for another input in the production process
d.	none of the above


	

	5.	The combinations of inputs costing a constant C dollars is called:
a.	an isocost line
b.	an isoquant curve
c.	the MRTS
d.	an isorevenue line
e.	none of the above



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