Question :
11) A cost-minimizing firm will increase its use of labour : 1384208
11) A cost-minimizing firm will increase its use of labour and decrease its use of capital when the
A) marginal product of capital is higher than the marginal product of labour.
B) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
C) average product of capital is higher than the average product of labour.
D) total product of capital is higher than the total product of labour.
E) marginal product of capital, per dollar spent on capital, is less than the marginal product of labour, per dollar spent on labour.
12) The principle of substitution plays a central role in resource allocation because it demonstrates that
A) firms will find it profitable to make abundant use of relatively scarce factors.
B) methods of producing the same commodity will not differ from one country to another.
C) firms can use all factors of production interchangeably with no impact on their costs.
D) prices will be relatively low for those factors for which demand is high relative to supply.
E) relative factor prices reflect relative scarcities of factors in the economy and so firms will find it profitable to make abundant use of relatively abundant factors.
13) Suppose that a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day. The price of labour is $10 per unit and the price of capital is $5 per unit. The MPL equals 2 and the MPK equals 5. In this situation,
A) the firm is minimizing its costs.
B) the firm should increase the use of both inputs.
C) the firm could lower its production costs by decreasing labour input and increasing capital input.
D) the firm could lower its production costs by increasing labour input and decreasing capital input.
E) the firm should decrease the use of both inputs.
14) Suppose that a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day. The price of labour is $5 per unit and the price of capital is $2 per unit. The MPL equals 5 and the MPK equals 2. In this situation, the firm
A) is minimizing its costs.
B) should increase the use of both inputs.
C) could lower its production costs by decreasing labour input and increasing capital input.
D) could lower its production costs by increasing labour input and decreasing capital input.
E) should decrease the use of both inputs.
15) Consider a firm that uses only labour and capital as inputs. At the present use of labour and capital, the MP of labour is four times the MP of capital, and the price of labour is twice the price of capital. In order to minimize its costs, the firm should
A) substitute capital for labour until their marginal products are equal.
B) decrease both capital and labour.
C) decrease capital and increase labour.
D) increase both labour and capital.
E) stay at its present factor mix.
16) Consider a firm that uses only labour and capital. At the present use of labour and capital, the MP of labour is two times the MP of capital, and the price of labour is two times the price of capital. In order to minimize its costs, the firm should
A) substitute capital for labour until their marginal products are equal.
B) decrease both capital and labour.
C) decrease capital and increase labour.
D) increase both labour and capital.
E) not alter its present factor mix.
17) Consider a firm that uses only labour and capital. At the present use of labour and capital, the MP of labour is twice the MP of capital, and the price of labour is four times the price of capital. In order to minimize its costs, the firm should
A) increase capital and decrease labour.
B) decrease both capital and labour.
C) decrease capital and increase labour.
D) increase both labour and capital.
E) maintain its present factor mix.
18) Suppose a firm employs two inputs, X and Y, and that at their current levels of use MPX/PX > MPY/PY. To minimize the cost of production, the firm should hire
A) more input Y and less input X.
B) more input X and less input Y.
C) more input Y only if its price falls.
D) more input X only if its price increases.
E) more input X only if its price decreases.
19) When a cost-minimizing firm is faced with an increase in the relative price of labour, it adjusts its factor usage so as to
A) increase the marginal product of capital relative to the marginal product of labour.
B) increase the marginal product of labour relative to the marginal product of capital.
C) use more labour per unit of output than before.
D) use more of both capital and labour per unit of output.
E) maintain the previous usage of labour.
20) Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of labour rises, the cost-minimizing firm should
A) employ more labour and less capital because MPK/MPL > PK/PL.
B) employ more capital and less labour because MPK/MPL > PK/PL.
C) employ more labour and less capital because MPK/MPL < PK/PL.
D) employ more capital and less labour because MPK/MPL < PK/PL.
E) do nothing.
