question
The short run is
answer
B) a time period in which at least one input is fixed.
question
The slope of the total product curve is the
answer
D) marginal product.
question
When labor usage is at 12 units, output is 36 units. From this we may infer that
answer
A) the average product of labor is 3. B) the marginal product of labor is 3.
C) the total product of labor is 1/3.
D) none of the above
C) the total product of labor is 1/3.
D) none of the above
question
When the average product is decreasing, marginal product
answer
A) is decreasing.
B) is increasing.
C) equals average product.
D) exceeds average product.
E) is less than average product
B) is increasing.
C) equals average product.
D) exceeds average product.
E) is less than average product
question
Technological improvement
answer
A) can be shown as a shift in the total product curve.
B) allows more output to be produced with the same combination of inputs.
C) can hide the presence of diminishing returns.
D) All of the above are true.
B) allows more output to be produced with the same combination of inputs.
C) can hide the presence of diminishing returns.
D) All of the above are true.
question
According to the law of diminishing returns
answer
A) the marginal product of an input will eventually be negative.
B) the total product of an input will eventually decline.
C) the marginal product of an input will eventually decline.
D) the total product of an input will eventually be negative.
E) none of the above
B) the total product of an input will eventually decline.
C) the marginal product of an input will eventually decline.
D) the total product of an input will eventually be negative.
E) none of the above
question
The law of diminishing returns applies to
answer
A) both the short and the long run.
B) the long run only.
C) the short run only.
D) all inputs, with no reference to the time period.
E) neither the short nor the long run.
B) the long run only.
C) the short run only.
D) all inputs, with no reference to the time period.
E) neither the short nor the long run.
question
Marginal product crosses the horizontal axis (is equal to zero) at the point where
answer
A) average product is maximized.
B) diminishing returns set in.
C) output per worker reaches a maximum.
D) total product is maximized.
E) All of the above are true.
B) diminishing returns set in.
C) output per worker reaches a maximum.
D) total product is maximized.
E) All of the above are true.
question
Refer to Figure 6.1. At which point on the total product curve is the average product of labor the
highest?
highest?
answer
A) point A.
B) point B.
C) point C.
D) point D.
E) none of the above
B) point B.
C) point C.
D) point D.
E) none of the above
question
Complete the following table:
answer
(see table)
question
If we take the production function and hold the level of output constant, allowing the amounts of
capital and labor to vary, the curve that is traced out is called:
capital and labor to vary, the curve that is traced out is called:
answer
A) an isoquant.
B) the total product.
C) the marginal product.
D) the average product.
E) none of the above
B) the total product.
C) the marginal product.
D) the average product.
E) none of the above
question
As we move downward along a typical isoquant, the slope of the isoquant
answer
A) becomes linear. B) becomes flatter.
C) becomes steeper. D) remains constant.
C) becomes steeper. D) remains constant.
question
An examination of the production isoquants in the diagram below reveals that:
answer
A) capital and labor are perfectly substitutable.
B) capital and labor will be used in fixed proportions.
C) the MRTS is constant.
D) Both B and C are correct.
E) none of the above
B) capital and labor will be used in fixed proportions.
C) the MRTS is constant.
D) Both B and C are correct.
E) none of the above
question
The diagram below shows an isoquant for the production of wheat.
answer
Which point has the highest marginal productivity of labor?
A) Point A
B) Point B
C) Point C
D) Point D
A) Point A
B) Point B
C) Point C
D) Point D
question
A construction company builds roads with machinery (capital, K) and labor (L). If we plot the
isoquants for the production function so that labor is on the horizontal axis, then a point on the
isoquant with a small MRTS (in absolute value) is associated with high ________ use and low
________ use.
isoquants for the production function so that labor is on the horizontal axis, then a point on the
isoquant with a small MRTS (in absolute value) is associated with high ________ use and low
________ use.
answer
A) labor, capital
B) concrete, gravel
C) capital, labor
D) none of the above
B) concrete, gravel
C) capital, labor
D) none of the above
question
According to the diagram below, where each isoquant's output level is marked to the right of the
isoquant, production is characterized by
isoquant, production is characterized by
answer
A) increasing, constant and decreasing returns to scale.
B) decreasing returns to scale.
C) increasing returns to scale.
D) constant returns to scale.
B) decreasing returns to scale.
C) increasing returns to scale.
D) constant returns to scale.
question
If input prices are constant, a firm with increasing returns to scale can expect
answer
A) costs to go up less than double as output doubles.
B) to never reach the point where the marginal product of labor is equal to the wage.
C) costs to double as output doubles.
D) costs to more than double as output doubles.
E) to hire more and more labor for a given amount of capital, since marginal product increases.
B) to never reach the point where the marginal product of labor is equal to the wage.
C) costs to double as output doubles.
D) costs to more than double as output doubles.
E) to hire more and more labor for a given amount of capital, since marginal product increases.
question
A production function assumes a given
answer
A) ratio of input prices.
B) amount of output.
C) set of input prices.
D) technology.
E) amount of capital and labor
B) amount of output.
C) set of input prices.
D) technology.
E) amount of capital and labor
question
In a production process, all inputs are increased by 10%; but output increases less than 10%. This
means that the firm experiences
means that the firm experiences
answer
A) decreasing returns to scale.
B) increasing returns to scale.
C) constant returns to scale.
D) negative returns to scale.
B) increasing returns to scale.
C) constant returns to scale.
D) negative returns to scale.
question
The rate at which one input can be reduced per additional unit of the other input, while holding
output constant, is measured by the
output constant, is measured by the
answer
A) marginal rate of substitution.
B) slope of the isocost curve.
C) average product of the input.
D) marginal rate of technical substitution.
B) slope of the isocost curve.
C) average product of the input.
D) marginal rate of technical substitution.
question
Marico Corp. can manufacture 50,000 ball bearings per day at one of its production facilities. If the company uses the same facility for manufacturing rivets, a total of 35,000 rivets can be produced each day. Calculate Marico Corp.'s implicit cost per day of producing rivets at this facility.
answer
a. The monetary value of 50,000 ball bearings
b. The monetary value of 30,000 rivets
c. The monetary value of 15,000 ball bearings
d. The monetary value of 15,000 rivets
b. The monetary value of 30,000 rivets
c. The monetary value of 15,000 ball bearings
d. The monetary value of 15,000 rivets
question
The monetary cost of the space a restaurant rents to produce meals can be categorized as a:
answer
a. variable cost.
b. marginal cost.
c. fixed cost.
d. opportunity cost.
b. marginal cost.
c. fixed cost.
d. opportunity cost.
question
If fixed costs are $10,000 and variable costs are constant at $1.00 per unit over the relevant range of output, what will the average total cost be when 10,000 units are produced?
answer
a. $0.20
b. $2.00
c. $5.00
d. $1.00
b. $2.00
c. $5.00
d. $1.00
question
A firm's costs are determined by:
answer
a. its production function.
b. the market price of its product.
c. the market demand curve.
d. its production possibility frontier.
b. the market price of its product.
c. the market demand curve.
d. its production possibility frontier.
question
A firm's costs are determined by:
answer
a. its production function.
b. the market price of its product.
c. the market demand curve.
d. its production possibility frontier.
b. the market price of its product.
c. the market demand curve.
d. its production possibility frontier.
question
Which of the following is correct?
answer
a. Total Fixed Cost = Total Cost + Total Variable Cost
b. Total Cost = Total Variable Cost + Marginal Cost
c. Average Fixed Cost = Average Total Cost - Average Variable Cost
d. Average Total Cost = Marginal Cost + Average Fixed Cost
b. Total Cost = Total Variable Cost + Marginal Cost
c. Average Fixed Cost = Average Total Cost - Average Variable Cost
d. Average Total Cost = Marginal Cost + Average Fixed Cost
question
Which of the following does not decline as output increases?
answer
a. Marginal cost
b. Average fixed cost
c. Average cost
d. Total fixed cost
b. Average fixed cost
c. Average cost
d. Total fixed cost
question
In the short run, a firm's marginal cost rises because of:
answer
a. a decline in output prices.
b. a decline in marginal productivity of inputs.
c. decreasing returns to scale.
d. the flexibility in input usage.
b. a decline in marginal productivity of inputs.
c. decreasing returns to scale.
d. the flexibility in input usage.
question
The law of diminishing marginal returns:
answer
a. is relevant in both the short and the long-run.
b. says that increasing fixed inputs eventually results in smaller and smaller increases in total output.
c. says that increasing variable inputs eventually results in smaller and smaller increases in total output.
d. says that increasing variable inputs eventually results in smaller and smaller increases in total cost.
b. says that increasing fixed inputs eventually results in smaller and smaller increases in total output.
c. says that increasing variable inputs eventually results in smaller and smaller increases in total output.
d. says that increasing variable inputs eventually results in smaller and smaller increases in total cost.
question
Once diminishing returns have set in, each additional unit of output:
answer
a. requires less of the variable input than the previous unit.
b. requires less cost outlay than the previous unit.
c. requires more of the fixed input than the previous unit.
d. requires more cost outlay than the previous unit.
b. requires less cost outlay than the previous unit.
c. requires more of the fixed input than the previous unit.
d. requires more cost outlay than the previous unit.
question
Which of the following statements about the relationship between marginal cost and average cost is correct?
answer
a. When MC is falling, AC is rising.
b. AC equals MC at MC's lowest point.
c. When MC exceeds AC, AC must be rising.
d. When AC exceeds MC, MC must be rising.
b. AC equals MC at MC's lowest point.
c. When MC exceeds AC, AC must be rising.
d. When AC exceeds MC, MC must be rising.
question
Suppose labor is on the horizontal axis and capital on the vertical axis. If the total cost is defined by the equation TC = $400 + $15L + $10K, the slope of the isocost curve is:
answer
a. -0.667
b. -1.5
c. -8
d. -40
b. -1.5
c. -8
d. -40
question
A tangency between an isocost line and an isoquant shows all the following, except:
answer
a. the maximum output attainable by a firm at a given cost.
b. the minimum cost necessary to produce a given output.
c. an input combination where the ratio of marginal products equals the ratio of the input prices.
d. an input combination where the returns to labor and capital inputs are equal.
b. the minimum cost necessary to produce a given output.
c. an input combination where the ratio of marginal products equals the ratio of the input prices.
d. an input combination where the returns to labor and capital inputs are equal.
question
Suppose the wage rate is $15 per hour and the rental rate of capital is $10 per hour. If the
marginal product of labor is 60 and the marginal product of capital 10, the profit maximizing firm should:
marginal product of labor is 60 and the marginal product of capital 10, the profit maximizing firm should:
answer
a. hire more labor and less capital.
b. utilize more capital and less labor.
c. maintain its current input mix of capital and labor.
d. employ more of both capital and labor.
b. utilize more capital and less labor.
c. maintain its current input mix of capital and labor.
d. employ more of both capital and labor.
question
When average costs fall as output increases, it is due to _____; when they fall at a given level of output it is due to _____.
answer
a. economies of scale; learning by doing
b. economies of scale; diseconomies of scale
c. learning by doing; economies of scale
d. learning by doing; diseconomies of scale
b. economies of scale; diseconomies of scale
c. learning by doing; economies of scale
d. learning by doing; diseconomies of scale
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