1.A 15 per cent increase in all inputs leads to only a 5 per cent increase in the output. Are the returns to scale increasing, constant or diminishing? Illustrate your answer 2.What is the slope of an iso-cost line equal to and why? Provide mathematical explanation 3.“By definition, cost is zero if a firm does not hire any input. Hence cost-minimization essentially means shutting down the operation of the firm.” Do you agree with the statement? Justify you answer by giving an explanation from microeconomic theory.
1.A 15 per cent increase in all inputs leads to only a 5 per cent increase in the output. Are the returns to scale increasing, constant or diminishing? Illustrate your answer 2.What is the slope of an iso-cost line equal to and why? Provide mathematical explanation 3.“By definition, cost is zero if a firm does not hire any input. Hence cost-minimization essentially means shutting down the operation of the firm.” Do you agree with the statement? Justify you answer by giving an explanation from microeconomic theory.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1.A 15 per cent increase in all inputs leads to only a 5 per cent increase in the output. Are the returns to scale increasing, constant or diminishing? Illustrate your answer
2.What is the slope of an iso-cost line equal to and why? Provide mathematical explanation
3.“By definition, cost is zero if a firm does not hire any input. Hence cost-minimization essentially means shutting down the operation of the firm.” Do you agree with the statement? Justify you answer by giving an explanation from
4.What is meant by an expansion path? Illustrate expansion paths for a normal input and an inferior input.
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