Question 1

A production function tells the firm

Accepted Answer

A)  the maximum it can expect to produce with a given mix of inputs. 
B)  the average it can expect to produce with a given mix of inputs. 
C)  the minimum it can expect to produce with a given mix of inputs. 
D)  the average level of production for other firms in the industry. 
A)  the maximum it can expect to produce with a given mix of inputs. 
B)  the average it can expect to produce with a given mix of inputs. 
C)  the minimum it can expect to produce with a given mix of inputs. 
D)  the average level of production for other firms in the industry.

Question 2

Limited liability is a benefit to

Accepted Answer

A)  sole proprietorships. 
B)  partnerships. 
C)  corporations. 
D)  All of the above. 
A)  sole proprietorships. 
B)  partnerships. 
C)  corporations. 
D)  All of the above.

Question 3

Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?

Accepted Answer

A)  q = L + 5K 
B)  q = 5 ∗ (L + K) 
C)  q = 5L + K 
D)  All of the above are possible. 
A)  q = L + 5K 
B)  q = 5 ∗ (L + K) 
C)  q = 5L + K 
D)  All of the above are possible.

Question 4

The Average Product of Labor is

Accepted Answer

A)  the change in total product resulting from an extra unit of labor, holding other factors constant. 
B)  the ratio of output to the number of workers used to produce that output. 
C)  the amount of output that can be produced by a given amount of labor. 
D)  equal to the marginal product of labor when the average product is increasing. 
A)  the change in total product resulting from an extra unit of labor, holding other factors constant. 
B)  the ratio of output to the number of workers used to produce that output. 
C)  the amount of output that can be produced by a given amount of labor. 
D)  equal to the marginal product of labor when the average product is increasing.

Question 5

Non-neutral technological change is more valuable to labor than neutral technological change.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that additional units of capital affect the marginal productivity of labor.This is not unrealistic.Word processors increase the marginal productivity of secretaries.On the other hand,robotic equipment can completely replace a worker and,thereby,lower the marginal productivity of labor.Given this possibility,determine the conditions under which isoquants will not be convex (i.e.,concave).

Accepted Answer

The slope of the isoquant equals -MP_L/MP_K.

Question 7

An isoquant represents levels of capital and labor that

Accepted Answer

A)  have constant marginal productivity. 
B)  yield the same level of output. 
C)  incur the same total cost. 
D)  All of the above. 
A)  have constant marginal productivity. 
B)  yield the same level of output. 
C)  incur the same total cost. 
D)  All of the above.

Question 8

During the "computer revolution" of the 1980s and 1990s,many firms replaced old technology with new technology.What might explain why firms don't change technology as quickly today?

Accepted Answer

The marginal rate of technical substitut

Question 9

The slope of an isoquant tells us

Accepted Answer

A)  how much output increases when both inputs are increased. 
B)  the increase in MPL when capital increases. 
C)  the decrease in capital necessary to keep output constant when labor increases by one unit. 
D)  the decrease in capital necessary to keep MPL constant when labor increases by one unit. 
A)  how much output increases when both inputs are increased. 
B)  the increase in MPL when capital increases. 
C)  the decrease in capital necessary to keep output constant when labor increases by one unit. 
D)  the decrease in capital necessary to keep MPL constant when labor increases by one unit.

Question 10

Returns to scale is a concept that operates

Accepted Answer

A)  only in the short run. 
B)  only in the long run. 
C)  in both the long run and the short run. 
D)  in either the long run or the short run but never both. 
A)  only in the short run. 
B)  only in the long run. 
C)  in both the long run and the short run. 
D)  in either the long run or the short run but never both.

Question 11

Over a five-year span,the ABC Co.reduced the amount of labor it hired.At the same time,the marginal productivity of labor increased.Which of the following COULD explain this observation?

Accepted Answer

A)  the law of diminishing marginal returns 
B)  labor saving technical change 
C)  organizational innovation 
D)  All of the above. 
A)  the law of diminishing marginal returns 
B)  labor saving technical change 
C)  organizational innovation 
D)  All of the above.

Question 12

Which of the following statements best summarizes the law of diminishing marginal returns?

Accepted Answer

A)  In the short run, as more labor is hired, output diminishes. 
B)  In the short run, as more labor is hired, output increases at a diminishing rate. 
C)  In the short run, the amount of labor a firm will hire diminishes as output increases. 
D)  As more labor is hired, the length of time that defines the short run diminishes. 
A)  In the short run, as more labor is hired, output diminishes. 
B)  In the short run, as more labor is hired, output increases at a diminishing rate. 
C)  In the short run, the amount of labor a firm will hire diminishes as output increases. 
D)  As more labor is hired, the length of time that defines the short run diminishes.

Question 13

Suppose the production of paved roadways can be represented as q = L0.5 + K0.5.Which of the following statements is (are)TRUE?

Accepted Answer

A)  Labor is subject to diminishing marginal productivity in the short run. 
B)  Labor and capital are imperfect substitutes. 
C)  The isoquants for paved roadways are convex. 
D)  All of the above. 
A)  Labor is subject to diminishing marginal productivity in the short run. 
B)  Labor and capital are imperfect substitutes. 
C)  The isoquants for paved roadways are convex. 
D)  All of the above.

Question 14

Let the production function be q = ALaKb.Returns to scale are equal to

Accepted Answer

A)  a ∗ b. 
B)  a + b. 
C)  La + Kb. 
D)  A ∗ L. 
A)  a ∗ b. 
B)  a + b. 
C)  La + Kb. 
D)  A ∗ L.

Question 15

-The table in the above figure shows the levels of output resulting from different levels of inputs.Which of the following conclusions can be drawn from this information?

Accepted Answer

A)  Increasing returns to scale exist between 100 and 200 units of output. 
B)  Constant returns to scale exist throughout all levels of production. 
C)  Labor is subject to diminishing marginal productivity in the short run. 
D)  No firm conclusions can be drawn. 
A)  Increasing returns to scale exist between 100 and 200 units of output. 
B)  Constant returns to scale exist throughout all levels of production. 
C)  Labor is subject to diminishing marginal productivity in the short run. 
D)  No firm conclusions can be drawn.

Question 16

Efficient production occurs if a firm

Accepted Answer

A)  cannot produce its current level of output with fewer inputs. 
B)  given the quantity of inputs, cannot produce more output. 
C)  maximizes profit. 
D)  All of the above. 
A)  cannot produce its current level of output with fewer inputs. 
B)  given the quantity of inputs, cannot produce more output. 
C)  maximizes profit. 
D)  All of the above.

Question 17

The slope of the total product curve always equals

Accepted Answer

A)  the ratio of the marginal product and the average product. 
B)  the change in input divided by the change in output. 
C)  the average product of the input. 
D)  the marginal product of the input. 
A)  the ratio of the marginal product and the average product. 
B)  the change in input divided by the change in output. 
C)  the average product of the input. 
D)  the marginal product of the input.

Question 18

Production functions only apply to advanced economies.

Accepted Answer

A) True 
 B)False

Question 19

-Lectures in microeconomics can be delivered either by an instructor (labor)or a movie (capital)or any combination of both.Yet,it gets harder and harder to substitute more movies for an instructor the more movies are already used.Which graph in the above figure best represents the isoquants for lectures in microeconomics when capital per day is on the vertical axis and labor per day is on the horizontal axis?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D

Question 20

Isoquants that are downward-sloping straight lines exhibit

Accepted Answer

A)  an increasing marginal rate of technical substitution. 
B)  a decreasing marginal rate of technical substitution. 
C)  a constant marginal rate of technical substitution. 
D)  a marginal rate of technical substitution that cannot be determined. 
A)  an increasing marginal rate of technical substitution. 
B)  a decreasing marginal rate of technical substitution. 
C)  a constant marginal rate of technical substitution. 
D)  a marginal rate of technical substitution that cannot be determined.

A production function tells the firm

Limited liability is a benefit to

Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?

The Average Product of Labor is

Non-neutral technological change is more valuable to labor than neutral technological change.

An isoquant represents levels of capital and labor that

During the "computer revolution" of the 1980s and 1990s,many firms replaced old technology with new technology.What might explain why firms don't change technology as quickly today?

The slope of an isoquant tells us

Returns to scale is a concept that operates

Over a five-year span,the ABC Co.reduced the amount of labor it hired.At the same time,the marginal productivity of labor increased.Which of the following COULD explain this observation?

Which of the following statements best summarizes the law of diminishing marginal returns?

Suppose the production of paved roadways can be represented as q = L^0.5 + K^0.5.Which of the following statements is (are)TRUE?

Let the production function be q = AL^aK^b.Returns to scale are equal to

-The table in the above figure shows the levels of output resulting from different levels of inputs.Which of the following conclusions can be drawn from this information?

Efficient production occurs if a firm

The slope of the total product curve always equals

Production functions only apply to advanced economies.

Isoquants that are downward-sloping straight lines exhibit

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 6: Firms and Production

A production function tells the firm

Limited liability is a benefit to

Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?

The Average Product of Labor is

Non-neutral technological change is more valuable to labor than neutral technological change.

An isoquant represents levels of capital and labor that

During the "computer revolution" of the 1980s and 1990s,many firms replaced old technology with new technology.What might explain why firms don't change technology as quickly today?

The slope of an isoquant tells us

Returns to scale is a concept that operates

Over a five-year span,the ABC Co.reduced the amount of labor it hired.At the same time,the marginal productivity of labor increased.Which of the following COULD explain this observation?

Which of the following statements best summarizes the law of diminishing marginal returns?

Suppose the production of paved roadways can be represented as q = L0.5 + K0.5.Which of the following statements is (are)TRUE?

Let the production function be q = ALaKb.Returns to scale are equal to

-The table in the above figure shows the levels of output resulting from different levels of inputs.Which of the following conclusions can be drawn from this information?

Efficient production occurs if a firm

The slope of the total product curve always equals

Production functions only apply to advanced economies.

Isoquants that are downward-sloping straight lines exhibit

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose the production of paved roadways can be represented as q = L^0.5 + K^0.5.Which of the following statements is (are)TRUE?

Let the production function be q = AL^aK^b.Returns to scale are equal to