View Go Tools Window Help chegg.com -chapterreview.pdf (page 2 of 2) Q Search 8

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View Go Tools Window Help chegg.com -chapterreview.pdf (page 2 of 2) Q Search 8 Amume the amount of labor is on the x-axis and the amount of capital is on the y-axis. If the price of labor doubles, what happens to the slope of the isocost lines? (a) They become Batter (less negative)- (b) They become steeper (more negative). (c) The stay the same. (d) Not enough information to determine the relatlonsship. iphilló 9. The long-nan total cost curve shws (a) the minimam total cost t any level of output, holding input prices fixed, and choosing all inpats to minimize coet hill (b) fr a fixed level of apital, tbe minimum cost to produce a giwa level of output. (e) the various combinatioes of eapital and labor that will peoduce different levels of out put at the same oost (d) the varlous combinations of capital and labor that will peodace the same level of output 10. If both the price of labor and captial increase by the same amount (a 1), what will bappen to the cot- minimizing combination of labor and capital? (o) The aevent of labor and capital will stay the s (b) None of the other choices (c) The smount of labor and capital will both d mw. (d) The amount of labor and capital will both increase IL For aspecifie value of Q. if thn output elwticity of total cowt i» greater than 1,ere.Q->1,then (a) there are economies of seale (b) there are incressing returns to scale. (e) theee are decreasing returns to scale (d) there are diseconomies of scale. 12. If the shoet-un total cont in siwe ty STC32+2q, and 7 of the fissi osts are sunk, what is minim (n) 4 ,, 5

Explanation / Answer

First question is answered below

1.

Correct option: (b) they become steeper

Reason: As price of labor doubles, firms will start substituting labor for capital, thereby reducing labor input used and increasing capital used. Thus the isocost line titl upwards in favor of capital (y-axis) and move inwards from labor (x-axis), making the isocost line steeper.

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