Final Production 160 Exam Questions Chapter 7 - Microeconomics Theory and Applications 13th Edition | Test Bank with Answer Key by Edgar K. Browning, Mark A. Zupan. DOCX document preview.
Package: Test Bank
Title: Microeconomics: Theory and Application, 13e
Chapter Number: 7
Question Type: Multiple Choice
1. Which of the following correctly describes a production function?
a. A production function shows the minimum output that can be produced with given inputs.
b. A production function relates employment of inputs to output.
c. A production function identifies output-cost relationships.
d. A production function identifies the profit maximizing level of output.
Learning Objective: Establish the relationship between inputs and output.
2. A production function identifies the _____.
a. minimum output that a specific combination of inputs can produce
b. maximum number of inputs that can be used to produce output
c. highest possible output for a given combination of inputs
d. least-cost method of producing a given level of output
Learning Objective: Establish the relationship between inputs and output.
3. Economists use production functions to _____.
a. define what is technically efficient for different combinations of inputs
b. explain the tradeoff between the use of different inputs in production
c. maximize profits for a firm
d. define the marginal utilities associated with the goods produced
Learning Objective: Establish the relationship between inputs and output.
4. A technologically efficient level of output is the _____.
a. maximum output possible from the least amount of inputs
b. level of output produced using the latest technology available
c. cost-minimizing level of output
d. maximum output available from a given set of inputs
Learning Objective: Establish the relationship between inputs and output.
5. Which of the following is true of fixed costs?
a. Fixed costs can be changed, but it is extremely costly to do so in a short period of time.
b. Fixed costs cannot be changed in the long-run.
c. Fixed costs can be changed, but only in the short run.
d. Fixed costs cannot be changed in the short-run, because most firms experience constant returns to scale in the short run.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
6. A production function for widgets will _____.
a. show the relationship between the inputs used in the production of widgets and the cost of acquiring these inputs
b. identify the least quantity of inputs that can be used to produce a given level of widgets
c. identify the maximum quantity of widgets that can be produced given the budget of the firm
d. identify the maximum quantity of widgets that can be produced by each specific combination of inputs
Learning Objective: Establish the relationship between inputs and output.
7. A firm that is operating in a technologically inefficient way:
a. is getting the maximum output from its inputs.
b. is making zero economic profits.
c. is not making as much money as it potentially can.
d. should shut down immediately to reduce its losses.
Learning Objective: Establish the relationship between inputs and output.
8. What is meant by technological efficiency in production?
a. Using the latest available technology in production
b. Producing the maximum possible output from given inputs
c. Using the least number of inputs in production
d. Minimizing the cost of production
Learning Objective: Establish the relationship between inputs and output.
9. A farmer is growing corn on an acre of land. Output will be 200 bushels if one worker is hired, 500 if two, 700 if three, 850 if four, and 900 if five. The marginal product of the fourth worker is _____ bushels of corn.
a. 850
b. 150
c. 212.5
d. 50
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
10. A carpenter hammers nails each day at work. During the first hour she can hammer 120 nails, the second hour 100 nails, the third hour 90 nails, the fourth hour 60 nails, and the fifth hour 10 nails. Her marginal product in the third hour is _____ nails.
a. 10
b. –10
c. 90
d. –60
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
11. A carpenter hammers nails each day at work. During the first hour she can hammer 120 nails, the second hour 100 nails, the third hour 90 nails, the fourth hour 60 nails, and the fifth hour 10 nails. The total product of five hours of work is _____ nails.
a. 10
b. 380
c. 320
d. 60
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
12. A carpenter hammers nails each day at work. During the first hour she can hammer 120 nails, the second hour 100 nails, the third hour 90 nails, the fourth hour 60 nails, and the fifth hour 10 nails. The average product of five hours work is _____ nails.
a. 80
b. 380
c. 320
d. 76
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
13. The table shows the quantities of labor and capital required to produce various levels of output.
Amount of Capital | Amount of Labor | Total Product |
5 | 1 | 10 |
5 | 2 | 24 |
5 | 3 | 42 |
5 | 4 | 56 |
5 | 5 | 66 |
5 | 6 | 74 |
5 | 7 | 80 |
What is the average product of labor when four units of labor are used?
a. 10
b. 14
c. 42
d. 33
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
14. A carpenter hammers nails each day at work. The average number of nails hammered over the first three hours is 50, and the marginal product of the fourth and fifth hours of work is 40 and 20 nails, respectively. The total output after five hours work is _____ nails.
a. 150
b. 110
c. 210
d. 60
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
15. A carpenter hammers nails each day at work. In each of the first three hours 50 nails were hammered and the marginal product of the fourth and fifth hours of work is 40 and 20 nails, respectively. Diminishing returns will be experienced in the _____ hour.
a. second
b. third
c. fourth
d. first
Difficulty: Hard
Section Reference: Production When Only One Input Is Variable: The Short Run
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
16. If the average product of labor is 150 bushels of wheat when three workers farm an acre of land and the marginal product of the fourth worker is 75 bushels, then the total output with four workers is _____ bushels.
a. 225
b. 50
c. 525
d. 675
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
17. The ratio of total product to the total quantity of the input being used is _____.
a. equal to marginal product
b. constant as the levels of the input vary
c. equal to average product
d. equal to the marginal rate of technical substitution
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
18. The ratio of the change in total product to the change in total quantity of the input being used is _____.
a. equal to marginal product
b. constant as employment levels of the input vary
c. equal to average product
d. equal to the marginal rate of technical substitution
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
19. The table shows the combinations of labor and capital that are used to produce various levels of output.
A rational producer would never operate with _____ units of labor and 2 units of capital.
a. 2
b. 1
c. 5
d. 4
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
20. The table shows the combinations of labor and capital required to produce various level of output.
Assume that capital remains fixed while labor is the only variable input used in production. If the firm is currently producing 26 units of output using three units of labor, what is the marginal product of labor at this point?
a. 2
b. 4
c. 6
d. 8
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
21. The table shows the combinations of labor and capital required to produce various level of output.
Assume that labor remains fixed while capital is the only variable input used in production. If the firm is currently producing 26 units of output using three units of labor, what is the marginal product of capital at this point?
a. 2
b. 4
c. 6
d. 8
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
22. The table shows the quantities of labor and capital required to produce various levels of output.
Amount of Capital | Amount of Labor | Total Product |
5 | 1 | 10 |
5 | 2 | 24 |
5 | 3 | 42 |
5 | 4 | 56 |
5 | 5 | 66 |
5 | 6 | 74 |
5 | 7 | 80 |
What is the marginal product of the fourth worker?
a. 10
b. 14
c. 42
d. 56
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
23. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, marginal product of labor becomes negative beyond point _____.
a. A
b. B
c. C
d. D
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
24. The figure shows the total product curve for different levels of a variable input, labor.
To the left of point B:
a. marginal product is rising but average product is falling.
b. marginal product is rising and is above the average product.
c. marginal product is falling but average product is rising.
d. total product is increasing at a decreasing rate.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
25. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, marginal product of labor is positive but lesser than the average product of labor after point _____.
a. A
b. B
c. C
d. D
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
26. The figure shows the total product curve for different levels of a variable input, labor.
A firm would choose to operate between points C and D because:
a. marginal product has already reached a maximum.
b. average product is rising over that range.
c. marginal product and average product are positive, but falling.
d. marginal product and average product are rising.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
27. If total product is increasing at a decreasing rate, then marginal product is _____.
a. below average product at all levels of output
b. above average product at all levels of output
c. declining faster than average product
d. increasing at a decreasing rate
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
28. If the marginal product of a variable input is declining, then:
a. average product is also declining.
b. total product is also declining.
c. total product is increasing at a decreasing rate.
d. average product is constant.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
29. When the total product curve with only one variable input is increasing at a decreasing rate:
a. marginal product is positive but declining.
b. marginal product curve is negative and decreasing.
c. the slope of the marginal product curve is zero.
d. marginal product is positive and increasing.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
30. Which of the following statements is true of the relationship between marginal product and average product of labor?
a. When the marginal product of labor is decreasing, the average product of labor must also be decreasing.
b. When the average product of labor is increasing, the marginal product of labor must also be increasing.
c. When the marginal and average products of labor are equal, the marginal product is at its minimum.
d. When the average product of labor is decreasing, average product must be greater than marginal product.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
31. When marginal product is decreasing:
a. average product must also be decreasing.
b. total product is decreasing.
c. total product is increasing at a decreasing rate.
d. marginal product must be greater than average product.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
32. The average product of labor at a particular point can be determined:
a. by the slope of the total product curve at that point.
b. by multiplying the total product by the quantity of labor at that point.
c. by the slope of a line from the origin to the particular point on the total product curve.
d. by the vertical distance of the average product curve from the marginal product curve.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
33. The slope of a ray from the origin to the total product curve measures _____.
a. the marginal rate of technical substitution
b. the marginal product of the variable factor
c. the average product of the variable factor
d. the maximum output
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
34. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, a firm would choose to operate _____ on the total product curve.
a. between O and A
b. at point E
c. between B and D
d. between D and E
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
35. The slope of the total product curve measures the _____ of the input.
a. marginal product
b. average product
c. total product
d. cost
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
36. The figure shows the total product curve for different levels of a variable input, labor.
Between points O and C in The figure:
a. the marginal product of labor is falling.
b. the average product of labor is rising.
c. total product rises and then falls.
d. marginal product reaches its minimum.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
37. The figure shows the total product curve for different levels of a variable input, labor.
Let point A be the inflection point. When the quantity of labor employed is between A and D in the figure:
a. marginal product is negative.
b. marginal product is decreasing.
c. average product is increasing.
d. marginal product is increasing at a decreasing rate.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
38. The figure shows the total product curve for different levels of a variable input, labor.
When the labor input employed in production is between points O and C in the figure:
a. average product reaches a minimum.
b. marginal product reaches a maximum.
c. marginal product is below average product.
d. total product first increases at a decreasing rate and then increases at an increasing rate.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
39. The figure shows the total product curve for different levels of a variable input, labor.
When the quantity of labor employed lies between points C and D in the figure:
a. marginal product reaches a maximum.
b. average product is rising and reaches a maximum at D.
c. total product declines.
d. marginal product is falling.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
40. The figure shows the total product curve for different levels of a variable input, labor.
Which of the following is true when the labor input is between points C and D?
a. marginal product reaches a maximum and then declines.
b. marginal product reaches a maximum and then becomes negative.
c. average product is equal at point B and C.
d. total product is increasing at a decreasing rate.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
41. The figure shows the total product curve for different levels of a variable input, labor.
When the quantity of labor employed lies between points D and E in the figure:
a. marginal product reaches a maximum and then declines.
b. marginal product reaches a maximum and then becomes negative.
c. total product is increasing at a decreasing rate.
d. total product is decreasing.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
42. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, marginal product reaches a maximum at point _____.
a. A
b. B
c. C
d. D
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
43. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, average product reaches a maximum at point _____.
a. A
b. B
c. C
d. D
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
44. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, at point D _____.
a. total product is zero
b. marginal product is zero
c. average product is negative
d. average product reaches a maximum
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
45. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, at point C _____.
a. average product equals marginal product
b. marginal product is at a maximum
c. total product is increasing at an increasing rate
d. average product is declining but positive
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
46. When the marginal and average products of labor are equal:
a. marginal product must be at its maximum.
b. marginal product must be at a minimum.
c. average product must be at its maximum.
d. average product must be increasing.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
47. Diminishing marginal returns refers to the:
a. decline in the rate at which extra inputs are employed in production.
b. fall in average product associated with a unit increase in the fixed input.
c. decline in total product which is less than proportionate to a change in the fixed input.
d. fall in output per unit with an incremental increase in the variable input.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
48. According to the law of diminishing marginal returns:
a. when the amount of some input is increased by equal increments, holding other inputs constant, the resulting increments in output will be negative.
b. when all inputs are increased proportionately, output eventually will decrease at a smaller rate.
c. when the amount of some input is increased at equal increments, holding other inputs constant, the resulting increments in output will eventually decrease.
d. firms will not operate on the portion of the total product curve where marginal product is declining.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
49. The law of diminishing returns holds only:
a. for goods with inelastic demand.
b. when one input is fixed.
c. in the long run.
d. in a competitive market.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
50. The figure shows the total product curve for different levels of a variable input, labor.
In the figure, the law of diminishing marginal returns comes into play beyond point _____.
a. A
b. B
c. C
d. D
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
51. The fact that limited use of caffeine can improve mental alertness and help performance, while excessive use of caffeine can cause anxiety and trembling shows _____.
a. that coffee is an inferior good
b. the law of diminishing marginal returns with respect to test performance
c. the law of returns to scale with respect to test performance
d. decreasing returns to scale in coffee production
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
52. The law of diminishing marginal returns _____.
a. is relevant in the short run.
b. assumes all the inputs are fixed
c. is applicable to fixed and variable inputs
d. applies when all inputs are increased
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
53. The table shows the combinations of labor and capital that are used to produce various levels of output
Based on the input-usage ratio, we can say that the firm is operating _____.
a. at an economic loss
b. in the short-run
c. in a constant-cost industry
d. in the long-run
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
54. The duration of the short run varies by industry because _____.
a. the total labor demand varies by industry
b. some inputs cost more in some industries
c. the technology used in production is not the same in all industries
d. the time required to change a variable input differs by industry
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
55. Isoquants that are farther away from the origin indicate:
a. lower cost combinations of inputs.
b. technologically inefficient levels of output.
c. higher levels of output.
d. combinations of inputs that are less preferred.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
56. A production isoquant identifies _____.
a. the maximum output possible, given a fixed budget
b. the different combinations of goods that can be produced, given fixed amounts of inputs
c. the different combinations of inputs that can be used to produce a fixed rate of output
d. the cost of producing a given output
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
57. If the level of technical know-how increases, how would this change the total product curve?
a. It would extend horizontally.
b. It would become more bowed.
c. It would shift upwards.
d. It would become flatter.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
58. In the long run, _____.
a. the marginal cost of each input differs by the ratio of their prices
b. all inputs to production are fixed
c. the marginal cost of each input equals the ratio of their prices
d. all inputs to production are variable
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
59. An isoquant shows _____.
a. the different quantities of output that can be produced with different quantities of inputs
b. the combination of inputs that can be used to produce a fixed quantity of output
c. the different quantities of output that can be produce with fixed quantities of inputs
d. the combination of inputs than can be used to produce different quantities of output
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
60. Which of the following is constant along an isoquant?
a. Productivity of the variable input
b. Output
c. Cost
d. Utility
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
61. The short-run refers to:
a. a time period of two years or less.
b. the time period in which the usage of all inputs are held constant.
c. the time period in which it is too costly to change the usage of at least one input.
d. the time period in which the usage of all inputs can be changed.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
62. The long-run refers to:
a. a time period of one year or more.
b. the time period in which all inputs are variable.
c. the time period in which it is too costly to change the usage of at least one input.
d. a time period when marginal returns are diminishing.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
63. One important difference between indifference curves and isoquants is that:
a. indifference curves are convex while isoquants are concave to the origin.
b. indifference curves can never intersect while isoquants can intersect.
c. output shown on isoquants is measurable while well-being shown on indifference curves is not.
d. indifference curves are likely to be positively sloped while isoquants are mostly negatively sloped.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
64. What can you conclude about an isoquant that is concave to the origin?
a. The level of output shown on the isoquant increases along the curve.
b. The isoquant represents production in the short run as one input is kept fixed.
c. The marginal rate of technical substitution increases along the curve.
d. The slope of the isoquant is infinite.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
65. Convexity of a curve implies that the slope of the curve:
a. is zero.
b. is constant.
c. diminishes along the curve.
d. approaches infinity.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
66. Which of the following is a feature of an isoquant?
a. Isoquants are concave to the origin.
b. Isoquants are nonintersecting.
c. Isoquants lying farther to the northeast identify lower levels of output.
d. Producers prefer higher points on an isoquant.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
67. If isoquants are drawn as right angles, it implies:
a. that the two inputs are perfect substitutes for each other.
b. that the MRTS is constant.
c. that the inputs must be used in fixed proportions.
d. the isoquants can be intersecting.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
68. If isoquants are drawn as straight lines, it implies that:
a. the two inputs are perfect substitutes for each other.
b. the MRTS is decreasing.
c. that the inputs must be used in fixed proportions.
d. the MRTS is zero.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
69. The marginal rate of technical substitution:
a. equals the marginal product of capital times the marginal product of labor.
b. measures the rate at which marginal product declines as inputs are increased.
c. measures the degree to which one input can be substituted for another, output held constant.
d. is the horizontal distance between two isoquants.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
70. The table shows the combinations of labor and capital required to produce various level of output.
If the firm is currently producing 26 units of output using three units of labor, what is the marginal rate of technical substitution of labor for capital at this point?
a. -1
b. -2
c. -3
d. -4
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
71. If the marginal product of labor is 25 and the marginal product of capital 10, what is the marginal rate of technical substitution of labor for capital?
a. 0.6
b. 1
c. 1.5
d. 2.5
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
72. An isoquant map, with labor on the horizontal axis and capital on the vertical axis, has horizontal isoquants. This implies that the:
a. marginal product of capital is zero.
b. marginal rate of substitution of capital for labor approaches infinity.
c. marginal product of labor is zero.
d. marginal rate of substitution of capital for labor is positive.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
73. Suppose you have capital on the vertical axis and labor on the horizontal axis. The slope of the isoquant measures:
a. the marginal rate of substitution.
b. the marginal product of labor.
c. the marginal product of capital.
d. the marginal rate of technical substitution of capital for labor.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
74. Which of the following statements about the marginal rate of technical substitution is correct?
a. The MRTS is equal to the ratio of the marginal productivities of the inputs.
b. The MRTS is equal to the slope of the total product curve.
c. The MRTS is zero in the long run.
d. The MRTS is the rate at which one input can be substituted for the other in production while varying the level of output.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
75. Suppose that at a point on an isoquant, the following information is true: MPL = 3 and MPK = 2. Then if K falls by 5, L must increase by:
a. 0.30.
b. 0.67.
c. 3.33.
d. 1.50.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
76. Suppose that at a point on an isoquant, the following information is true: L increases by 5; K falls by 3; MPL = 4, then MPK must be:
a. 3.33.
b. 0.67.
c. 1.67.
d. 6.67.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
77. The marginal rate of technical substitution equals the ratio of the _____.
a. total product of capital and labor
b. marginal products of the inputs
c. marginal cost of both inputs
d. amount of capital employed to the amount of labor employed
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
78. With energy [E] on the horizontal axis and land [L] on the vertical axis, the marginal rate of technical substitution of energy for land (MRTSEL) equals:
a. MPL/MPE
b. -ΔE/ΔL
c. -ΔQ/ΔL
d. (MPL/ΔE)(ΔL/MPE)
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
79. The table shows the shows the quantities of labor and capital required to produce various levels of output.
Quantity of Capital | Quantity of Labor | Output |
6 | 2 | 40 |
12 | 4 | 100 |
24 | 8 | 220 |
48 | 16 | 440 |
96 | 32 | 800 |
When the firm increases production from 48 units of capital and 16 units of labor to 96 units of capital and 32 units of labor, the production function exhibits:
a. increasing returns to scale.
b. constant returns to scale.
c. diminishing marginal returns.
d. decreasing returns to scale.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
80. The table shows the shows the quantities of labor and capital required to produce various levels of output.
Quantity of Capital | Quantity of Labor | Output |
6 | 2 | 40 |
12 | 4 | 100 |
24 | 8 | 220 |
48 | 16 | 440 |
96 | 32 | 800 |
When the firm increases production from 24 units of capital and 8 units of labor to 48 units of capital and 16 units of labor, the production function exhibits:
a. decreasing marginal rate of technical substitution.
b. constant returns to scale.
c. increasing returns to scale.
d. diminishing marginal returns
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
81. The table shows the shows the quantities of labor and capital required to produce various levels of output.
Quantity of Capital | Quantity of Labor | Output |
6 | 2 | 40 |
12 | 4 | 100 |
24 | 8 | 220 |
48 | 16 | 440 |
96 | 32 | 800 |
When the firm expands from 6 units of capital and 2 units of labor
to 12 units of capital and 4 units of labor, the production function exhibits:
a. increasing returns to scale.
b. constant returns to scale.
c. decreasing returns to scale.
d. diminishing marginal returns.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
82. If a firm doubles its usage of all inputs and output less than doubles, the production function
is said to exhibit:
a. increasing returns to scale.
b. decreasing returns to scale.
c. constant returns to scale.
d. decreasing marginal returns to a fixed factor of production.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
83. Which of the following correctly explains increasing returns to scale?
a. With small scale operations, management inefficiencies are avoided.
b. Increasing the number of workers in a factory allows division and specialization of labor.
c. Firms that operate in small industries have higher input procurement costs.
d. Communication channels in large organizations tend to be complex.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
84. If a firm doubles its usage of all inputs, and output also doubles, the production function is said to exhibit:
a. increasing returns to scale.
b. decreasing returns to scale.
c. constant returns to scale.
d. increasing marginal returns to a fixed factor of production.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
85. If a firm doubles its usage of all inputs, and output more than doubles, the production function is said to exhibit:
a. increasing returns to scale.
b. decreasing returns to scale.
c. constant returns to scale.
d. increasing marginal returns to a fixed factor of production.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
86. The production function exhibits increasing returns to scale when a firm can increase production by more than a proportionate increase in _____.
a. costs
b. one input
c. all inputs
d. a fixed input
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
87. A production function exhibits decreasing returns to scale when _____ increases less than proportionately to input use.
a. cost per unit
b. average product
c. marginal product
d. total product
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
88. A factory that manually produces pens employs ten workers. The total output when one worker produces all the parts of a pen himself is 100 pens. When different workers focus on producing different parts of the pen, the output increases to 400 pens. In other words, _____ increases the returns from the same level of inputs.
a. increasing the capital-labor ratio/irs
b. product diversification
c. a piece rate wage system
d. specialization of labor
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
89. All of the following give rise to increasing returns to scale, except:
a. specialization and division of labor.
b. the use of certain large-scale technologies
c. the use of the latest technology.
d. diversification of production.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
90. Which of the following contributes to the increasing returns to scale in production as a firm expands capacity?
a. Specialization of labor
b. Increase in average cost and decrease in output
c. Increase labor while keeping capital constant
d. Increase in marginal utility
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
91. The fact that a large-scale operation can take advantage of specialization of labor often gives rise to _____.
a. constant marginal rate of substitution
b. diseconomies of scale
c. increasing returns to scale
d. management inefficiencies
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
92. Graphically, the _____ indicates whether returns to scale are increasing, constant, or decreasing.
a. spacing of isoquants along a ray from the origin
b. slope of the isoquant
c. curvature of the isoquant
d. steepness of the isoquant
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
93. Returns to scale can be evaluated by looking at how output changes along _____.
a. a ray from the origin
b. the points of intersection of two or more isoquants
c. the horizontal axis
d. an isoquant.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
94. A production function embodies increasing, constant, and decreasing returns to scale:
a. when the proportion of capital to labor used in production is constant.
b. at low output levels.
c. in the short-run.
d. at various points on an isoquant.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
95. Which of the following may explain why decreasing returns to scale occur?
a. Diminishing marginal rate of technical substitution
b. The law of diminishing marginal utility
c. Managerial inefficiencies
d. Division and specialization of labor
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
96. Estimation of a production function from the linear equation Q = a + bL + cK, assumes that the law of diminishing returns _____.
a. applies to labor only
b. applies to capital only
c. applies to both capital and labor
d. does not apply to either input
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
97. Which of the following represents a Cobb-Douglas production function?
a. Q = a + bL + cK
b. Q = a + Lb + Kc
c. Q = aLbKc
d. Q = L + K
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
98. A production function of the form Q = aLbKc:
a. implies constant marginal products for the inputs.
b. implies constant average products for the inputs.
c. incorporates the assumption of diminishing returns to the inputs.
d. cannot imply diminishing returns to the inputs.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
99. The power associated with an input in a Cobb-Douglas production function implies diminishing returns to that input if the power is _____.
a. greater than 1
b. less than 1
c. equal to 1
d. zero
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
100. In a Cobb-Douglas production function, the law of diminishing returns does not apply to a variable input if:
a. the power associated with the input is less than one.
b. the sum of the powers of the other inputs is equal to one.
c. the sum of the powers of the other inputs is greater than one.
d. the power associated with the input is equal to or greater than unity.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
101. If the sum of the powers associated with the inputs in a Cobb-Douglas production function exceeds 1, the production function is characterized by:
a. constant returns to scale.
b. decreasing returns to scale.
c. increasing returns to scale.
d. diminishing returns to all inputs.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
Question Type: True/False
102. Outputs are also called factors of production.
Learning Objective: Establish the relationship between inputs and output.
103. Factors of production are all of the materials mixed together by a firm through its technology to produce output.
Learning Objective: Establish the relationship between inputs and output.
104. The production function is a relationship between inputs and output that identifies the maximum output that can be produced per time period by each specific combination of inputs.
Learning Objective: Establish the relationship between inputs and output.
105. Production efficiency is a condition in which the firm produces the maximum output from any given combination of labor and capital inputs.
Learning Objective: Establish the relationship between inputs and output.
106. Resources that a firm cannot feasibly vary over the time period involved are referred to rigid or locked inputs.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
107. Total product is the total output of the firm.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
108. Average product is the total output divided by the amount of the time needed to produce that output/
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
109. The marginal product of an input represents the change in total output resulting from a one-unit change in the amount of the input, holding the quantities of other inputs constant.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
110. When marginal product is greater than average product, average product must be decreasing.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
111. If the addition to total product is greater than the average, the average must fall.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
112. The law of diminishing marginal returns is an empirical generalization about the way output responds to increases in the employment of a variable input.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
113. In economic terms, the short run is less than one year.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
114. In economic terms, the lone run is more than one year.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
115. All inputs are variable in the short run.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
116. All inputs are variable in the long run.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
117. An isoquant is a curve that shows all the combinations of inputs that, when used in a technologically efficient way, will produce a certain level of output.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
118. Isoquants are generally upward sloping as long as both inputs are productive.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
119. Higher output levels for isoquants further to the northwest.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
120. Two isoquants can never intersect.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
121. Isoquants will generally be concave to the origin.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
122. The marginal rate of technical substitution is the amount by which one input can be reduced without changing output when there is a small (unit) increase in the amount of another input.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
123. The degree to which inputs can be substituted for one another, as measured by the marginal rate of technical substitution, is directly linked to the marginal productivities of the inputs.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
124. The isoquant’s slope tells us the absolute size of both marginal product.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
125. Constant returns to scale is a situation in which a proportional increase in any input increases output in the same proportion.
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
126. The Cobb–Douglas production function is a production function that implies constant marginal products for inputs.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
127. If the power associated with an input in a Cobb–Douglas production function is greater than unity, the law of diminishing returns applies to that input over all possible levels of input usage.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
Question Type: Essay
128. For the following total product curves [TP1 and TP2] for a firm using labor as the only variable input in production, derive the associated marginal and average product curves [AP1, AP2, MP1, MP2] and explain the key relationships.
Learning Objective: Define total, average, and marginal product, and explain the law of diminishing marginal returns in the short-run setting when at least some inputs are fixed.
129. Answer the following:
a) What are the characteristics of isoquants?
b) How do they differ from indifference curves?
c) Graphically show that isoquants cannot intersect.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
130. Define and then derive the expression for the marginal rate of technical substitution.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
131 Draw isoquants for the following:
a) Tree Fellas Ltd. is a logging firm where the labor input is loggers and capital refers to chainsaws. The output produced is measured in terms of number of trees felled. One logger uses one chainsaw; a logger without a chainsaw will not contribute to output and neither will a chainsaw without a logger.
b) Porch & Co. is a newspaper distributing agency that has to deliver a total of 1,000 newspapers a week using two inputs: paperboys (labor) and newspaper vending machines (capital). If the firm hires an extra vending machine, it can replace one paperboy and still deliver the same number of newspapers.
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
132. The chemical industry is relatively capital-intensive. It uses more capital than labor. Conversely, the garment industry is relatively labor-intensive (it uses a larger proportion of labor then capital). How would you represent the isoquants for chemicals and garments on an isoquant map with labor on the horizontal axis and capital on the vertical axis?
Learning Objective: Investigate the ability of a firm to vary its output in the long run when all inputs are variable.
133. What factors give rise to increasing returns to scale and decreasing returns to scale?
Learning Objective: Explore returns to scale: how a firm’s output response is affected by a proportionate change in all inputs.
134. With capital (K) on the vertical axis and labor (L) on the horizontal axis, graphically illustrate increasing, constant, and decreasing returns to scale.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
135. Mark is a farmer who faces the production function Q = a + bL + cK, where L is the labor input and K is capital. Show that the law of diminishing returns does not apply to Mark’s farm in the short-run.
Capital | Labor | Output |
1 | 1 | 7 |
1 | 2 | 11 |
1 | 3 | 15 |
1 | 4 | 19 |
1 | 5 | 23 |
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
136. Consider the following Cobb-Douglas production function, T = aLbKcEd, where T is t-shirts produced, L is labor input, K is capital, and E is energy input. Mathematically show how the returns to scale of the production function depends upon the parameters a, b, c, and d.
Learning Objective: Describe how production relationships can be estimated and some different potential functional forms for those relationships.
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Connected Book
Microeconomics Theory and Applications 13th Edition | Test Bank with Answer Key
By Edgar K. Browning, Mark A. Zupan