CLEP Microeconomics chapter practice4 questions

17 Long-Run Costs and Input Choice

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

Economies of scale exist over a range of output when

Economies of scale mean that expanding all relevant inputs lowers long-run cost per unit.
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D. long-run average cost falls as output rises

Economies of scale mean that expanding all relevant inputs lowers long-run cost per unit.

Question 2

Question 2 of 4

A firm can produce an output using either 4 units of labor and 8 machines or 6 units of labor and 5 machines. Labor costs 20 and machines cost 30. Which method costs less?

The first method costs 4(20)+8(30)=320; the second costs 6(20)+5(30)=270, which is $50 less.
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E. The second, by $50

The first method costs 4(20)+8(30)=320; the second costs 6(20)+5(30)=270, which is $50 less.

Question 3

Question 3 of 4

At the least-cost input combination, a firm using labor and capital should satisfy

The last dollar spent on each input should add the same output. Otherwise spending can be shifted toward the input with higher marginal product per dollar.
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C. MP_L/w=MP_K/r

The last dollar spent on each input should add the same output. Otherwise spending can be shifted toward the input with higher marginal product per dollar.

Question 4

Question 4 of 4

If the wage falls while the rental price of capital is unchanged, a cost-minimizing firm will generally

The wage reduction makes labor cheaper relative to capital, creating a substitution toward labor.
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A. substitute labor for capital

The wage reduction makes labor cheaper relative to capital, creating a substitution toward labor.

Quiz complete