An Examination of the Production Isoquants in the Diagram Below

question 33

Multiple Choice

An examination of the production isoquants in the diagram below reveals that:

• A)capital and labor will be used in fixed proportions.
• B)Capital and labor are perfectly substitutable.
• C)the MRTS is constant.
• D)Both B and C are correct.
• E)none of the above

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Definitions:

Contribution Margin

The amount of revenue remaining after subtracting variable costs, used to cover fixed costs and generate profit.

Mixed Costs

Expenses that have both a fixed and variable component, changing in total with the level of activity but also including a constant element.

Fixed Costs

Fixed costs are expenses that remain constant for a company regardless of how much it produces or sells, such as rent, salaries, and insurance premiums.

Variable Costs

Costs that fluctuate in direct proportion to the amount of production or sales figures.