Question 01 Suppose Ruthie consumes only tater tots and whiskey. If an increase

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Question 01 Suppose Ruthie consumes only tater tots and whiskey. If an increase in the price of whiskey causes her to consume less tots, then the two goods are gross substitutes A. True B. False Question 02. The isoquant curve represents the various combinations of inputs required to produce a given output. An isoquant with a diminishing marginal rate of technical substitution implies that as the firm uses more and more capital, it will have to give up less and less labor to maintain the same output leve A. True B. False Question 03 Which of the following production functions A. f(kl) = + 2k2 B. f(k,l) - k0410.7 exhibits constant returns to scale? D. None of the above

Explanation / Answer

1- here we can see that the cross price elasticity of two goods is negative, this happen when the goods are gross complements, as these goods are used together is fixed proportions thus change in price of one has negative effect on the quantity of other.

so answer is false.

2- true, diminisHING MRS, means that aswe keep on increasing one input we dint have to give up more of the other input to maintain the same level of output.

3- constant returns to scale means that as we increase the inputs in some proportion then output increases in the same proportions,

so here constant returns to scale function is alternative C

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