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11 Cards in this Set
- Front
- Back
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If Q = K2L2 the MPK is |
increasing |
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Suppose electricity (E) can be produced with coal (C) or gas (G) to operate steam turbines (T). Suppose gas is more efficiently burned than coal but that they are otherwise perfect substitutes. E = min((G + .5C), T). The isoquants between gas and coal will be |
straight lines |
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If more and more labor is employed while keeping all other inputs constant, the marginal physical productivity of labor |
will eventually decrease |
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A production function may exhibit |
constant returns to scale and diminishing marginal productivities to all inputs |
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Suppose the production function for good q is given by q = 3K + 2 L where K and L are capital and labor inputs. Consider three statements about this function: I. The function exhibits constant returns to scale. II. The function exhibits diminishing marginal productivities to all inputs. III. The function has a constant rate of technical substitution. Which of these statements is true? |
I and III but not II |
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A technical innovation in the production of automobiles by Ford Motor Company’s for 1 million cars per year would necessarily |
shift the “1 million car” isoquant toward the origin |
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. Suppose two goods coffee and creamer provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield |
an income effect but no substitution effect |
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Suppose U=min(X,Y) and the price of X is 1, the price of Y is 1 and income is $12. If the price of X increases to 2, the income effect (in terms of units of X bought) is
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-2 |
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If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g., coffee and cream for a coffee drinker who never varies the amount of cream used in each cup), then |
there is no substitution effect from a change in the price of coffee |
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Suppose demand can be written as PQ= 1000. The price elasticity of demand is |
constant regardless of prices and unit elastic |
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If demand is elastic, a decrease in quantity will cause the total spending (PxQ) to |
fall |
