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标题: Economics 【Reading 15】Sample [打印本页]
作者: Mechanic    时间: 2012-3-24 16:05     标题: [2012 L1] Economics 【Session 4 - Reading 15】Sample

Which of the following is an example of an implicit cost?
A)
Labor salaries.
B)
Rent.
C)
The opportunity cost of a firm's equity capital.


Implicit costs include the opportunity cost of a firm's equity. Explicit costs are measurable cash flows for operating expenses.
作者: spartan1    时间: 2012-3-24 16:06

Which of the following most completely describes opportunity costs?
A)
Opportunity costs include only implicit costs.
B)
Opportunity costs include only explicit costs.
C)
Opportunity costs include implicit and explicit costs.


Opportunity costs include implicit and explicit costs. Normal profit is the opportunity cost of owners’ time, resources, and expertise.
作者: spartan1    时间: 2012-3-24 16:07

Which of the following most accurately describes economic profit? Economic profits are zero when:
A)
implied rental rates equal forgone interest.
B)
total revenue equals the sum of all opportunity costs.
C)
implicit costs equal explicit costs.


Economic profit are zero when total revenues are just equal to the sum of all opportunity costs, which includes all implicit and explicit costs.
作者: spartan1    时间: 2012-3-24 16:07

Assume that a firm used $60 million in labor and materials to generate $100 million in total revenues. Other costs included $200,000 in foregone interest, economic depreciation of $40,000, and normal profit of $130,000. The economic profit to this firm is closest to:
A)
$39,712,000.
B)
$40,000,000.
C)
$39,630,000.


Economic profit = total revenue – opportunity costs = total revenue – (explicit + implicit costs). In this case, the labor and material cost of $60 million is the explicit cost. Implicit costs include the $200,000 in foregone interest, economic depreciation of $40,000, and normal profit of $130,000. So, total implicit costs equal $370,000 = $200,000 + $40,000 + $130,000. Thus, economic profit is $100,000,000 - $60,000,000 - $370,000 = $39,630,000.
作者: spartan1    时间: 2012-3-24 16:13

A worker is most likely to earn economic rent when the marginal revenue product (MRP) from her labor and the supply curve for her type of labor exhibit which of the following characteristics?
MRPSupply curve
A)
HighMore elastic
B)
LowLess elastic
C)
HighLess elastic


Economic rent is the difference between the price paid for a resource and its opportunity cost in its next-highest-valued employment. To earn economic rent, a worker must generate a high marginal revenue product. The less elastic its supply curve, the more of the wage is economic rent. Popular entertainers and professional athletes, for example, earn economic rent because their services are valued much more highly in those occupations (high MRP) than they would be in their next-best alternative, and very few people possess their specific skills (inelastic supply).
作者: spartan1    时间: 2012-3-24 16:13

Hazel Green, CFA, earned $90,000 last year working as a derivatives analyst. She is also a skilled web page designer. Green could earn $70,000 per year in that occupation, which she has determined is her next-highest paying alternative. The difference between Green’s income as a derivatives analyst and her potential income as a web page designer is best described as:
A)
opportunity cost.
B)
economic rent.
C)
marginal revenue product.


Economic rent to a worker is the difference between what she earns and what she could earn in her next highest paying alternative employment. Her potential earnings in her next highest valued employment is her opportunity cost. Marginal revenue product (MRP) is the revenue from selling the output of one additional unit of an input. A high MRP makes it possible for a worker to earn economic rent.
作者: spartan1    时间: 2012-3-24 16:14

Under which pair of conditions is a factor of production least likely to earn economic rent?
Supply curveDemand curve
A)
Perfectly elasticDownward sloping
B)
Perfectly inelasticPerfectly elastic
C)
Upward slopingDownward sloping


If the supply of a productive resource is perfectly elastic, it earns no economic rent. Elasticity of demand is not directly related to economic rent.
作者: spartan1    时间: 2012-3-24 16:14

Marginal revenue is equal to price for firms operating in which market structure(s)?
A)
Both perfect competition and imperfect competition.
B)
Neither perfect competition nor imperfect competition.
C)
Perfect competition only.


In perfectly competitive markets, firms can sell the entire quantity they produce at the market price, so marginal revenue is equal to the market price. In imperfect competition, firms are price searchers in that they can increase their quantity sold only by decreasing the selling price per unit. As a result, marginal revenue is less than price.
作者: spartan1    时间: 2012-3-24 16:16

Holding other input quantities constant, which of a firm’s factors of production most likely exhibit diminishing marginal productivity as the firm uses an increasing quantity of the input(s)?
A)
Both labor and capital.
B)
Labor only.
C)
Capital only.


Both labor and capital inputs exhibit diminishing marginal productivity as input quantities increase, holding other input quantities constant.
作者: spartan1    时间: 2012-3-24 16:17

A firm realizes that it is producing more than the profit maximizing level of output and makes a short-run decision to decrease its output. Which of the firm’s cost measures is least likely to decrease as a result?
A)
Average fixed cost.
B)
Average variable cost.
C)
Marginal cost.


A short-run decrease in output will cause a firm’s average fixed costs to increase because its fixed costs are spread over a smaller number of units. In terms of cost curves, average fixed cost never slopes upward, so a decrease in output never reduces average fixed costs. The average variable cost, average total cost, and marginal cost curves all have upward sloping components along which a lower level of output would result in a lower cost.
作者: spartan1    时间: 2012-3-24 16:18

Which of the following statements regarding marginal costs (MC) and average variable costs (AVC) is most accurate?
A)
MC = AVC when average total cost is at its minimum.
B)
MC = AVC when AVC is at its minimum.
C)
MC = Average total cost when AVC is at its minimum.


MC = AVC at minimum average variable cost. MC = ATC at minimum average total cost.
作者: spartan1    时间: 2012-3-24 16:18

Which of the following most accurately describes the shapes of the average variable cost (AVC) and average total cost (ATC) curves?
A)
The AVC curve is U-shaped whereas the ATC curve declines initially then flattens.
B)
The AVC and ATC curves are both U-shaped.
C)
The AVC and ATC curves both decrease initially, and then flatten.


The AVC curve is U-shaped, declining at first due to efficiency, but eventually increasing due to diminishing returns. The AFC curve decreases as output increases, and eventually flattens out. The ATC is U-shape because it is the sum of the decreasing-to-flat AFC curve plus the U-shaped AVC curve. ATC = AFC + AVC.
作者: spartan1    时间: 2012-3-24 16:18

Which of the following most accurately describes the shape of the average fixed cost (AFC) curve? The AFC curve:
A)
becomes flatter as output increases.
B)
is always below the average variable cost curve.
C)
intersects the marginal cost curve at the marginal cost curve’s minimum.


The AFC curve declines initially, but as output increases it flattens because a fixed cost is being averaged over more and more units of output.
作者: spartan1    时间: 2012-3-24 16:19

If marginal cost is above the average cost, when you produce your next unit:
A)
average cost will decline.
B)
average cost will increase.
C)
average cost will be flat.


If marginal cost is above the average cost, when you produce your next unit, average cost will increase. Because marginal cost is the cost of producing the next unit, and because this cost is above the firm's average cost per unit, the average cost per unit must increase, if only slightly. Based on the information provided in the question, there is no way to know what will happen to the marginal cost of future units produced.
作者: spartan1    时间: 2012-3-24 16:19

Which of the following most accurately describes the relationship between the average total cost (ATC) curve and the average variable cost (AVC) curve? The vertical distance between the ATC and AVC curves:
A)
increases as output increases.
B)
increases and then decreases as output increases.
C)
decreases as output increases.


The vertical distance between the ATC curve and AVC cost curve is average fixed cost, which decreases as output increases because more output is averaged over the same cost.
作者: spartan1    时间: 2012-3-24 16:19

Marginal cost is most accurately defined as the:
A)
cost that a consumer must incur to consume an additional unit of a good or service.
B)
value of the good or service that a consumer must forego in order to consume an additional unit of a good or service.
C)
cost of producing one more unit of a good or service.


Marginal cost is the cost of producing one more unit of output.
作者: spartan1    时间: 2012-3-24 16:20

Suppose a price-taker firm produces baseball bats that sell at a price of $100 each. This firm’s average total cost at the current level of production is $150 per bat, and the average fixed cost is $40 per bat. Which of the following statements is most accurate regarding this firm? They should:
A)
continue producing baseball bats because they are covering their fixed costs.
B)
shut down in the short run because their average total cost is greater than their price.
C)
shut down in the short run because their average variable cost is greater than their price.


Variable costs = $150 (ATC) − $40 (AFC) = $110 (AVC). At a selling price of $100 the firm is not covering its variable costs and will have losses greater than its fixed costs if it stays in business.
作者: spartan1    时间: 2012-3-24 16:20

In the short run, if price is below average total cost (ATC) the firm will:
A)
raise prices.
B)
keep running as long as it is covering its variable costs.
C)
produce more.


In the short run, if the firm is covering its average variable costs and some of its fixed costs it will continue to operate as long as the situation is temporary.
作者: spartan1    时间: 2012-3-24 16:20

In the long run, if price is below average total cost (ATC) the firm will:
A)
keep running.
B)
cover its variable costs.
C)
shut down.


If the price is below ATC then the firm is losing money. If the firm believes the price will never exceed ATC the only way to eliminate fixed costs is to go out of business.
作者: spartan1    时间: 2012-3-24 16:24

A firm in a perfectly competitive industry that seeks to maximize profit is most likely to continue production in the short run as long which of the following conditions exists? Price is equal to or greater than:
A)
average variable costs.
B)
average fixed cost.
C)
marginal cost.


If a firm is covering its average variable costs, it will continue to operate in the short run since it is covering some portion of its fixed costs.
作者: spartan1    时间: 2012-3-24 16:24

John Klement is a soybean farmer who harvests 125,000 bushels of soybeans annually. Klement’s fixed costs are $200,000 and his variable costs are $5 per bushel. Soybeans are currently priced at $5.35 per bushel. Based on his estimates, Klement sees soybean prices being relatively stable for the next two years, then increasing to $7.00 per bushel due to increased demand from Japan. What action should Klement take? Klement should:
A)
continue operating his business as usual.
B)
cut his production by 50% for the next two years and then resume full production.
C)
shut down for two years and then restart his business.


Since Klement is selling soybeans, a common commodity, he is a price taker and therefore can not adjust the price. He should continue operating his business as normal as he is currently covering variable costs and part of fixed costs. In two years from now, he will be able to cover both fixed and variable costs and be able to make a substantial profit.
作者: spartan1    时间: 2012-3-24 16:24

The upward sloping segment of a long-run average total cost curve represents the existence of:
A)
economies of scale.
B)
efficiencies of scale.
C)
diseconomies of scale.


Diseconomies of scale occur along the upward sloping segment of the long-run average total cost curve where costs rise as output increases. The flat portion at the bottom of the long-run average total costs curve represents constant returns to scale.
作者: spartan1    时间: 2012-3-24 16:25

Which of the following most accurately describes economies of scale? Economies of scale:
A)
increase at a decreasing rate.
B)
occur when long-run unit costs fall as output increases.
C)
are dependent on short-run average costs.


Economies of scale occur when the percentage increase in output is greater than the percentage increase in the cost of all inputs. Economies of scale occur over the range where the long-run average cost curve slopes downward.
作者: spartan1    时间: 2012-3-24 16:25

A firm can determine its profit-maximizing quantity of output by producing up to the quantity at which:
A)
total revenue equals total cost.
B)
marginal revenue equals marginal cost.
C)
average revenue equals average total cost.


At the profit-maximizing quantity of output, marginal revenue equals marginal cost. The quantity for which total revenue equals total cost, or average revenue equals average total cost, is the firm’s breakeven point.
作者: spartan1    时间: 2012-3-24 16:25

Which of the following statements about the short-run and long-run decision time frames is most accurate?
A)
In the long run, quantities of some resources are fixed.
B)
In the short run, technology of production is variable.
C)
In the long run, a firm can adjust its input quantities, production methods, and plant size.


In the short run, quantities of some resources, including technology of production, are fixed. Typically, economists treat labor and raw materials as variable, holding plant size, the amount of capital equipment, and technology constant. In the long run, all factors of production are assumed to be variable.
作者: spartan1    时间: 2012-3-24 16:26

Which of the following two factors are most likely to be considered variable during the short run?
A)
Labor and raw materials.
B)
Labor and technology.
C)
Raw materials and technology.


Of the sets of factors listed, the two that are typically considered variable in the short run are labor and raw materials.
作者: spartan1    时间: 2012-3-24 16:28

The short run is best defined as:
A)
the period for which the quantities of some resource inputs are fixed.
B)
the period for which the quantities of all factors of production are fixed.
C)
the time frame within which working capital decisions cannot be altered.


The short run is typically defined as the period for which the quantities of some, but not all, resources are fixed. Working capital is the difference between a firm’s current assets and current liabilities and consists of items (such as cash) that the firm can adjust in the short run.
作者: spartan1    时间: 2012-3-24 16:29

Which of the following factors of production is least likely to be fixed in the short run?
A)
Technology.
B)
Plant size.
C)
Labor.



Labor is typically assumed to be variable in the short run.
作者: spartan1    时间: 2012-3-24 16:30

Which of the following is least accurate with regard to the long-run and the short-run?
A)
Long-run cost curves pertain to plants of different sizes.
B)
In the long-run, all costs are variable.
C)
In the short run, only plant size is fixed.


In the short-run, labor is major variable cost. Plant size, in addition to technology and equipment, are fixed.
作者: spartan1    时间: 2012-3-24 16:30

Which of the following is least likely a characteristic of the long-run industry supply curve?
A)
The long-run supply curve is flatter than the short-run supply curve.
B)
In the long run, there will be a greater change of quantity supplied for a given price change, than in the short run.
C)
The long-run supply curve is less elastic than the short run supply curve.


The long-run supply curve is more elastic and flatter than the short-run supply curve. In the long-run, firms have greater flexibility to alter production scale and methods. Both remaining items in this question are true for the long-run supply curve.
作者: spartan1    时间: 2012-3-24 16:30

Which of the following statements about supply curves is least accurate? The:
A)
long-run supply curve for constant cost industries is horizontal.
B)
supply curve for the market is typically more elastic over the short run than the long run.
C)
long-run supply curve for decreasing cost industries slopes downward to the right.


The supply curve for products is typically more elastic over a longer time period than over a shorter period.
作者: dkishore1    时间: 2012-3-24 16:40

Compared to the short-run supply curve, the long-run supply curve is:
A)
flatter.
B)
steeper sloping upward to the right.
C)
more inelastic.


The long-run supply curve is more elastic and flatter than the short-run supply curve. In the long run, firms in an industry can adjust their production methods and scale.
作者: dkishore1    时间: 2012-3-24 16:40

The graph of two long run average total cost (LRATC) curves for a typical company appears below. Based on this graph, which of the following statements is least accurate?
A)
The use of improved technology may have caused the company to move from LRATC1 to LRATC2.
B)
The ideal plant size is indicated by point M.
C)
At point L, the company is experiencing economies of scale.


The use of improved technology would likely result in decreased costs and a downward shift in the LRATC. An upward shift in the LRATC curve may result from increased taxes, increased resource prices, or new government regulations, as these actions likely increase costs.
The other statements are true. Note: At point H, the firm is experiencing diseconomies of scale.
作者: dkishore1    时间: 2012-3-24 16:40

Which of the following most accurately describes the relationship between the slope of a firm’s long-run average total cost (LRATC) curve and scale economies?
Downward sloping
segment of LRATC		Upward sloping
segment of LRATC
A)
Diseconomies of scaleEconomies of scale
B)
Economies of scaleEconomies of scale
C)
Economies of scaleDiseconomies of scale


The downward sloping segment of the LRATC cost curve covers the output range where economies of scale exist because per unit costs decrease as output increases. The upward sloping segment of the LRATC curve is where diseconomies of scale are present because costs rise as output increases.
作者: dkishore1    时间: 2012-3-24 16:41

If the last unit of input increases total product we know that the marginal product of that input is:
A)
falling.
B)
positive.
C)
increasing.


As long as marginal product is positive, total product will increase. We would need more information to determine whether marginal product is falling or increasing.
作者: dkishore1    时间: 2012-3-24 16:41

Which of the following most accurately describes the typical relationship between marginal product (MP) and average product (AP)? As the quantity of labor increases:
A)
initially, AP > MP, then AP = MP, then AP < MP.
B)
initially, AP < MP, then AP = MP, then AP > MP.
C)
initially, AP = MP, then AP > MP.


MP intersects the AP minimum from above. MP is initially greater than average product, and then MP and AP intersect. Beyond this intersection, MP is less than AP. (Hint: sketch the curves.)
作者: dkishore1    时间: 2012-3-24 16:41

Which of the following most accurately describes the condition that typically exists when marginal product is at a maximum?
A)
Average variable cost is at a minimum.
B)
Marginal cost is at a minimum.
C)
Average product is at a minimum.


Marginal product is at a maximum when marginal cost is at a minimum. At the corresponding labor and output levels, average variable cost is decreasing and average product in increasing.
作者: dkishore1    时间: 2012-3-24 16:42

Typically, the short-run marginal product curve for an input used in production:
A)
increases proportionately to output.
B)
decreases proportionately to output.
C)
increases initially, reaches a peak, and then declines.


The marginal product curve for an input typically increases initially, reaches a peak at some point, and then decreases (marginal cost increases) as additional units of the input are used, holding the quantities of other factors constant.
作者: dkishore1    时间: 2012-3-24 16:42

Assume that output increased from 1,550 to 1,850 units per day as a result of increasing labor from 200 to 210 workers. The marginal product of labor is closest to:
A)
1.55 units per day per worker.
B)
30 units per day per worker.
C)
1.25 units per day per worker.


Marginal product is the additional output per additional unit of an input (labor). Since output changed by 300 units and labor changed by 10 workers, the marginal product is 300 / 10 = 30 units per day per worker.
作者: dkishore1    时间: 2012-3-24 16:42

The law of diminishing returns states that at some point as:
A)
less of a resource are devoted to production, holding the quantity of other inputs constant, the output will decrease, but at an increasing rate.
B)
more of a resource is devoted to production, holding the quantity of other inputs constant, at some point output will begin to decrease.
C)
more of a resource is devoted to production, holding the quantity of other inputs constant, the output will increase, but at a decreasing rate.


At low levels of output, increasing marginal returns will exist corresponding to the downward sloping portion of the marginal cost curve. As marginal costs begin to increase diminishing marginal returns will occur.
作者: dkishore1    时间: 2012-3-24 16:43

Based on the concept of diminishing returns, as the quantity of output increases, the short-run marginal costs of production eventually:
A)
rise at an increasing rate.
B)
fall at a decreasing rate.
C)
rise at a decreasing rate.


The law of diminishing returns states that as more variable resources are a production process combined with a fixed input, output will eventually increase at a decreasing rate. In the short run, as the quantity produced rises, costs rise at an increasing rate.
作者: dkishore1    时间: 2012-3-24 16:43

The law of diminishing returns states that for a given production process, as more and more of a resource (such as labor) are added, holding the quantities of other resources fixed:
A)
cost declines at a decreasing rate.
B)
output increases at a decreasing rate.
C)
cost declines at an increasing rate.


The law of diminishing returns states that for a given production process, as more and more resources (such as labor) are added holding the quantities of other resources fixed, output increases at a decreasing rate. This occurs because, at some point, adding more workers results in inefficiencies.
作者: dkishore1    时间: 2012-3-24 16:43

According to the law of diminishing returns, doubling the number of salespeople for a firm will most likely result in:
A)
decreasing the total sales of the firm as a result of competition amongst salespeople.
B)
doubling the total sales of the firm.
C)
increasing the total sales of the firm and reducing the average sales per salesperson.


The law of diminishing returns states that as more of a resource is added to a production process, holding other resource use constant, increases in output will eventually decrease. Therefore, as more salespeople are added they will generate more sales at a decreasing rate. Total sales will increase and the average sales per salesperson will decrease.
作者: dkishore1    时间: 2012-3-24 16:43

At a fixed level of capital, output increases as the quantity of labor increases, but at a decreasing rate. This phenomenon is an example of:
A)
law of diminishing costs to labor.
B)
law of diminishing returns to labor.
C)
law of diminishing returns to capital.


The law of diminishing returns states that at some point, as more and more of a resource (e.g., labor) is devoted to a production process, holding the quantity of other inputs constant, the output increases, but at a decreasing rate.
作者: dkishore1    时间: 2012-3-24 16:44

Which of the following statements regarding diminishing marginal returns is most accurate?
A)
As the quantity produced rises, costs begin to rise at a decreasing rate.
B)
The total cost curve arches downward.
C)
As the quantity produced rises, costs begin to rise at an increasing rate.


At production levels that are consistent with decreasing marginal returns, costs will increase at an increasing rate as production rises.
作者: dkishore1    时间: 2012-3-24 16:44

Holding the quantity of labor constant, output increases as the quantity of capital increases, but at a decreasing rate. This phenomenon is most accurately described as:
A)
diminishing marginal product of capital.
B)
diminishing marginal costs of capital.
C)
diminishing average returns to capital.


The marginal product of capital is the change in output divided by a unit change in capital, holding labor constant. Diminishing marginal product of capital means that at a constant level of labor, output increases as capital is added, but at a decreasing rate.
作者: dkishore1    时间: 2012-3-24 16:44

Are the following two statements about the marginal revenue product (MRP) of a factor of production accurate?
Statement 1: In a price taker market, the MRP of an input is the marginal product of the input multiplied by the price of the output it generates.
Statement 2: If we compare any two productive inputs, the one with the higher MRP will earn greater economic rent.
Statement 1Statement 2
A)
IncorrectCorrect
B)
CorrectIncorrect
C)
CorrectCorrect


Statement 1 is correct. MRP is the addition to total revenue from selling the output generated by one more unit of input. In a price taker market (i.e., perfect competition), marginal revenue is equal to price. Therefore, the MRP is the marginal product of the input times the output price. Statement 2 is incorrect. The extent to which a factor of production earns economic rent depends on the shape of its supply curve. An input with a high MRP might earn very little economic rent if the supply of the input is highly elastic. An input with a relatively lower MRP can earn significant economic rent if its supply is highly inelastic.
作者: dkishore1    时间: 2012-3-24 16:45

A shop foreman determines that an employee would produce two more units of output if he worked one additional hour. The product currently sells for $15.00 per unit and the firm is a price taker. Which of the following choices most accurately describes the relationship between the marginal revenue (MR) and marginal revenue product (MRP) from the additional hour of labor input?
A)
MR = $15 and MRP < MR.
B)
MRP > MR.
C)
MRP = MR.


By definition, the MR is the addition to total revenue from selling one more unit of output. The MRP is the revenue from selling the marginal product, which in this example is two units. Therefore the MRP must be greater than the MR.
作者: dkishore1    时间: 2012-3-24 16:45

The increase in total revenue from selling the additional output of one more unit of an input is called the input’s:
A)
marginal revenue product.
B)
factor of production.
C)
marginal revenue.


The marginal revenue product of an input is the addition to total revenue gained by selling the additional output from employing one more unit of that input.
作者: dkishore1    时间: 2012-3-24 16:45

Marginal revenue product is best defined as the:
A)
gain in total revenue from selling one more unit of output.
B)
additional output that results from employing one more unit of a productive input.
C)
addition to total revenue from selling the additional output from using one more unit of an input.


The marginal revenue product is the addition to total revenue from selling the additional output that one more unit of an input can produce. The additional output that results from employing one more unit of a productive input is the marginal product. The gain in total revenue from selling one more unit of output is the marginal revenue. A marginal revenue product exists for any level of output; it is not limited to the level at which marginal revenue equals marginal cost.
作者: dkishore1    时间: 2012-3-24 16:46

The quantity of labor that a profit maximizing firm will employ, holding other input factors constant, is the level at which:
A)
one more unit of labor would cost less than the value of its additional output.
B)
the marginal revenue product of labor is equal to the wage rate.
C)
the marginal product of labor is equal to the marginal cost of labor.


For any productive input, including labor, a profit maximizing firm will employ additional units of the input until its marginal revenue product is equal to its price (the wage rate is the price of labor). If one more unit of labor would cost less than the value of its additional output, the firm will increase profits by adding that unit. Marginal product is measured in units of output and cannot be compared directly to marginal cost, which is measured in units of money.
作者: dkishore1    时间: 2012-3-24 16:46

A firm should continue adding to its capital until the marginal revenue product of capital is:
A)
equal to the marginal revenue product of labor.
B)
equal to the cost of capital.
C)
greater than the cost of capital.


A firm should continue to accept capital projects until the marginal revenue product of capital (the value added) is equal to the cost of capital. Prior to this point, the firm gains from each unit of capital added.
作者: dkishore1    时间: 2012-3-24 16:46

Which of the following conditions is most likely to exist for a typical production process when average product is at its maximum?
A)
Average variable cost is at a minimum.
B)
Marginal product is increasing.
C)
Marginal cost is at a minimum.


When average product is at a maximum, average variable cost is at a minimum. At the corresponding labor and output level, marginal product is decreasing and marginal cost is increasing.
作者: dkishore1    时间: 2012-3-24 16:47

Which of the following most accurately describes the relationship between marginal cost (MC), average variable cost (AVC), marginal product (MP), and average product (AP)?
A)
When MP > AP, MC > AVC.
B)
When MP = AP, MC = AVC.
C)
When MP = AP, MC > AVC.


At some output level Q and corresponding labor input L, MC = AVC and MP = AP. At Q and L, AVC is at its minimum and AP is at its maximum. Hint: draw the curves.
作者: terpsichorefan    时间: 2013-3-6 19:17

Thanks for sharing



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