1. At the shut-down point: a) P=AVC b) TR=TVC c) the total losses of the firm eq
ID: 1104168 • Letter: 1
Question
1. At the shut-down point:
a) P=AVC
b) TR=TVC
c) the total losses of the firm equal TFC
d) all of the above
2. Let TC(Q)=10_3Q; MC equals___.
3. The slope of the isoquant tells the firm how much:
a) output increases when labor or capital increases by one unit.
b) output increases when both capital and labor are increased.
c) labor must decrease to keep output constant when capital increases by one unit.
d) a unit of capital costs relative to the cost of labor.
4. If only one part of the labor force employed by a firm can be dismissed at any time without affecting the level of output, the total wages and salaries paid out by the firm must be considered:
a) a fixed cost
b) a variable cost
c) partly a fixed and partly a variable cost
d) any of the above
Explanation / Answer
At the shut down point the price equals the verge bribe costs or ACC
TC=10-3Q so MC =dTC/dQ=-3
Slope of isoquant tells us how much Labour must decrease to keep output constant when capital increases by one unit. Concept is known as marginal rate of technical substitution.
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