Question

T or F?

30. a) Short-run and long-run average cost curves are both U-shaped because the firm must eventually encounter diminishing marginal returns to labor.

b) The production function describes how much output a firm can generate for various cost levels.

c) The marginal cost curve crosses both the average cost and variable cost curves at the minima.

d) If the wage and rental rates are $10 and $50 per hour respectively and an additional worker could produce 100 units of output in an hour, then an extra unit of capital could produce 500 units of output in an hour.

31. a) Moving down and to the right on an isoquant tells us how much quantity increases as inputs increase.

b) If an Engel curve is downward sloping, then one of the two goods must be inferior.

c) If the cross price elasticity of demand is negative, then the two goods under consideration must be complements.

d) By definition, someone who has a comparative advantage in producing soft drinks must also have an absolute advantage in producing soft drinks.

Answer 1

30)A.) TRUE both short and long run average cost curves are U shaped because initially there is increasing return and then diminishing Return

b)False. Production function shows different output/ production level for various labor/ input

c)True. Marginal cost intersects AC and AVC at their respective minima

d) True because MPL/wage rate=MpK/rent

thus statement B is false

31)A) False. As we move along the isoquant, more quantity of Good 1 is produced by sacrificing the other.

b)True. Inferior good whose demand decreases as income increases.

c)True. Complement goods which are used together

d)False. A good can have comparative advantage eventaugh it has lower absolute disadvantage