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c) the combinations of output that the consumer can purchase at current prices
with a given level of income
d) the cost-benefit ratio of each additional unit of output consumed
e) none of the above
Suppose the total cost (TC) of producing Q units of output is given as: TC = 100 + 6Q.
It follows that average variable cost is:
(a) 100/Q + 6Q
(b) 106/Q
(c) 106
(d) 100
(e) 6
Suppose a firm is able to produce 100 units of output per month when 10 workers
are employed, 180 units of output per month when 11 workers are employed, and
240 units of output when 12 workers are employed. From this information we can
deduce that:
a) marginal cost is falling as production expands
b) the marginal product of labour is declining as employment rises
c) the marginal product of labour is 240 for the last unit of labour employed
d) profits are maximized when the firm produces 10 units of output
e) all of the above
If production conditions for a firm are such that the marginal rate of technical
substitution (MRTS) is always constant, we can infer that:
a) the firms isoquant shows that the factor inputs can only be used in fixed
proportions
b) the firms isoquant is a straight line
c) the firms isoquant map exhibits constant returns to scale
d) all of the above
e) none of the above
Suppose total production costs are described by the cost function: TC = 40 + 7Q2 . Next
suppose that the fixed cost component rises from 40 to 90, so that production costs are
now TC = 90 + 7Q2. This increase in fixed cost implies:
a)
b)
marginal cost must be lower at each level of output because fixed cost is higher
in relation to variable costs
c)
marginal cost is always higher than fixed cost at each output level
d)
e)