- 8 Suppose A Firm S Short Run Production Function Is Q 10l Where K 10 Is The Fixed Level Of Capital And L Represents Va 1 (76.98 KiB) Viewed 35 times
8. Suppose a firm's short-run production function is q=10L, where K=10 is the fixed level of capital and L represents variable amounts of labor. Which of the following statements correctly characterizes this firm's short-run production process? a) Marginal product of labor (MPL) increases and then decreases. b) MPL always increases. c) MPL is constant. d) The firm faces diminishing MPL. e) All of the above are correct characterizations. 9. Suppose a firm views its two inputs, L (labor) and K (capital), as perfect substitutes in production. Under this circumstance, which of the following statements is true? a) The firm's production isoquants have the same shape as a consumer's budget line. b) The marginal rate of technical substitution (L for K) is constant. c) The ratio of marginal product of labor (MPL) to marginal product of capital (MPK) is constant. d) The firm will use whichever input costs less. e) All of the above statements are true.