PRODUCTION AND COSTS COST-MINIMIZING INPUT COMBINATION SAMPLE QUESTIONS AP Economics Mr. Bordelon

Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?

a.

b.

c.

d.

e.

TP A /P A = TP B /P B MP A /P A = MP B /P B TC A = TC B MP A = MP B (MP A )(P A ) = (MP B )(P B )

Assume a firm employs two inputs, A and B. The optimal hiring of inputs occurs when which of the following is true?

a.

b.

c.

d.

e.

TP A /P A = TP B /P B MP A /P A = MP B /P B TC A = TC B MP A = MP B (MP A )(P A ) = (MP B )(P B )

Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 100 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $25 per unit and the price of capital is $10 per unit. Max should: a.

increase the hiring of both labor and capital.

b.

c.

increase the hiring of labor and decrease the hiring of capital.

decrease the hiring of labor and increase the hiring of capital.

d.

e.

do nothing; he is hiring the optimal quantity of labor and capital.

decrease the hiring of both labor and capital.

Max employs both labor and capital to produce his trinkets. Currently the last unit of labor employed has a marginal product of 100 units. The last unit of capital employed has a marginal product of 40 units. The price of labor is $25 per unit and the price of capital is $10 per unit. Max should: a.

increase the hiring of both labor and capital.

b.

c.

increase the hiring of labor and decrease the hiring of capital.

decrease the hiring of labor and increase the hiring of capital.

d.

e.

do nothing; he is hiring the optimal quantity of labor and capital.

decrease the hiring of both labor and capital.

A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital?

a.

b.

c.

d.

e.

Demand for the product being produced increases by 5%.

The price of capital and labor both increase by 5%.

The productivity of labor increases by 5%.

The price of capital increases by 5%.

The price of labor increases by 5%.

A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring of both labor and capital?

a.

b.

c.

d.

e.

Demand for the product being produced increases by 5%.

The price of capital and labor both increase by 5%.

The productivity of labor increases by 5%.

The price of capital increases by 5%.

The price of labor increases by 5%.