Question 1

One way to explain the convexity of isoquants is to say that

Accepted Answer

A)  as labor increases and capital decreases, MPL rises while MPK falls. 
B)  as labor increases and capital decreases, MPL falls while MPK rises. 
C)  as labor increases and capital decreases, MPL and MPK both fall. 
D)  as labor increases and capital decreases, MPL and MPK both rise. 
A)  as labor increases and capital decreases, MPL rises while MPK falls. 
B)  as labor increases and capital decreases, MPL falls while MPK rises. 
C)  as labor increases and capital decreases, MPL and MPK both fall. 
D)  as labor increases and capital decreases, MPL and MPK both rise.

Question 2

The steeper an isoquant is,

Accepted Answer

A)  the greater is the marginal productivity of labor relative to that of capital. 
B)  the greater is the substitutability between capital and labor. 
C)  the greater is the need to keep capital and labor in fixed proportions. 
D)  the greater is the level of output. 
A)  the greater is the marginal productivity of labor relative to that of capital. 
B)  the greater is the substitutability between capital and labor. 
C)  the greater is the need to keep capital and labor in fixed proportions. 
D)  the greater is the level of output.

Question 3

Let the production function be q = ALaKb.The function exhibits decreasing returns to scale if

Accepted Answer

A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given. A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.

Question 4

Joey's lawncutting service recently traded in its push mowers for gasoline-powered mowers.Joey still requires one worker per lawnmower; however,more grass is now cut in the same amount of time as before.This is an example of

Accepted Answer

A)  labor-saving technical change. 
B)  non-neutral technical change. 
C)  neutral technical change. 
D)  organizational change. 
A)  labor-saving technical change. 
B)  non-neutral technical change. 
C)  neutral technical change. 
D)  organizational change.

Question 5

Suppose the production function for T-shirts can be represented as q = L0.25K0.75.Show that the marginal productivity of labor diminishes in the short run.

Accepted Answer

In the short run,MPL = 0.25 ∗

Question 6

Which situation is most likely to exhibit diminishing marginal returns to labor?

Accepted Answer

A)  a factory that obtains a new machine for every new worker hired 
B)  a factory that hires more workers and never increases the amount of machinery 
C)  a factory that increases the amount of machinery and holds the number of worker constant 
D)  None of these situations will result in diminishing marginal returns to labor. 
A)  a factory that obtains a new machine for every new worker hired 
B)  a factory that hires more workers and never increases the amount of machinery 
C)  a factory that increases the amount of machinery and holds the number of worker constant 
D)  None of these situations will result in diminishing marginal returns to labor.

Question 7

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 8

Returns to scale refers to the change in output when

Accepted Answer

A)  all inputs increase proportionately. 
B)  labor increases holding all other inputs fixed. 
C)  capital equipment is doubled. 
D)  specialization improves. 
A)  all inputs increase proportionately. 
B)  labor increases holding all other inputs fixed. 
C)  capital equipment is doubled. 
D)  specialization improves.

Question 9

Cobb-Douglas production functions can never possess varying returns to scale.

Accepted Answer

A) True 
 B)False

Question 10

In the Primary Metals industry,it is estimated that the elasticity of output with respect to labor is 0.51 and the elasticity of output with respect to capital is 0.73.These two measures indicate that the primary metals industry is characterized by

Accepted Answer

A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  no returns to scale. 
A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  no returns to scale.

Question 11

If the marginal productivity of labor is constant for all levels of output,then the average productivity of labor

Accepted Answer

A)  is constant. 
B)  equals the marginal productivity of labor. 
C)  Both A and B above. 
D)  Either A or B above but not both. 
A)  is constant. 
B)  equals the marginal productivity of labor. 
C)  Both A and B above. 
D)  Either A or B above but not both.

Question 12

-At Joey's Lawncutting Service,a lawn mower cannot cut grass without a laborer.A laborer cannot cut grass without a lawn mower.Which graph in the above figure best represents the isoquants for Joey's Lawncutting Service 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 13

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 14

How much do outputs increase when labor and capital increase from 1 to 2 units for the following production function ,q = 10L0.5K0.3?

Accepted Answer

A)  7.4 units. 
B)  7 units. 
C)  8 units. 
D)  None of the above. 
A)  7.4 units. 
B)  7 units. 
C)  8 units. 
D)  None of the above.

Question 15

-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 16

To say that isoquants are convex is to say that

Accepted Answer

A)  the marginal rate of technical substitution falls as labor increases. 
B)  capital and labor are perfect substitutes. 
C)  labor, but not capital, is subject to the law of diminishing marginal returns. 
D)  there are constant returns to scale. 
A)  the marginal rate of technical substitution falls as labor increases. 
B)  capital and labor are perfect substitutes. 
C)  labor, but not capital, is subject to the law of diminishing marginal returns. 
D)  there are constant returns to scale.

Question 17

In the food and kindred products industry,it is estimated that the elasticity of output with respect to labor is 0.43 and the elasticity of output with respect to capital is 0.48.These two measures indicate that the primary metals industry is characterized by

Accepted Answer

A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  no returns to scale. 
A)  decreasing returns to scale. 
B)  constant returns to scale. 
C)  increasing returns to scale. 
D)  no returns to scale.

Question 18

How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L0.5K0.5?

Accepted Answer

A)  L = 5 
B)  L = 2.5 
C)  L = 200 
D)  L = 2.25 
A)  L = 5 
B)  L = 2.5 
C)  L = 200 
D)  L = 2.25

Question 19

Which of the following statements best describes a production function?

Accepted Answer

A)  the maximum profit generated from given levels of inputs 
B)  the maximum level of output generated from given levels of inputs 
C)  all levels of output that can be generated from given levels of inputs 
D)  all levels of inputs that could produce a given level of output 
A)  the maximum profit generated from given levels of inputs 
B)  the maximum level of output generated from given levels of inputs 
C)  all levels of output that can be generated from given levels of inputs 
D)  all levels of inputs that could produce a given level of output

Question 20

Suppose firms A and B each make T-shirts.Firm A's production function is q = L0.5K0.5.Firm B's production function is q = 1.2 ∗ L0.5K0.5.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of APL and MPL.

Accepted Answer

Firm B's AP_L and MP_L w

One way to explain the convexity of isoquants is to say that

The steeper an isoquant is,

Let the production function be q = AL^aK^b.The function exhibits decreasing returns to scale if

Joey's lawncutting service recently traded in its push mowers for gasoline-powered mowers.Joey still requires one worker per lawnmower; however,more grass is now cut in the same amount of time as before.This is an example of

Suppose the production function for T-shirts can be represented as q = L^0.25K^0.75.Show that the marginal productivity of labor diminishes in the short run.

Which situation is most likely to exhibit diminishing marginal returns to labor?

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?

Returns to scale refers to the change in output when

Cobb-Douglas production functions can never possess varying returns to scale.

In the Primary Metals industry,it is estimated that the elasticity of output with respect to labor is 0.51 and the elasticity of output with respect to capital is 0.73.These two measures indicate that the primary metals industry is characterized by

If the marginal productivity of labor is constant for all levels of output,then the average productivity of labor

How much do outputs increase when labor and capital increase from 1 to 2 units for the following production function ,q = 10L^0.5K^0.3?

To say that isoquants are convex is to say that

In the food and kindred products industry,it is estimated that the elasticity of output with respect to labor is 0.43 and the elasticity of output with respect to capital is 0.48.These two measures indicate that the primary metals industry is characterized by

How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L^0.5K^0.5?

Which of the following statements best describes a production function?

Suppose firms A and B each make T-shirts.Firm A's production function is q = L^0.5K^0.5.Firm B's production function is q = 1.2 ∗ L^0.5K^0.5.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of AP_L and MP_L.

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

One way to explain the convexity of isoquants is to say that

The steeper an isoquant is,

Let the production function be q = ALaKb.The function exhibits decreasing returns to scale if

Joey's lawncutting service recently traded in its push mowers for gasoline-powered mowers.Joey still requires one worker per lawnmower; however,more grass is now cut in the same amount of time as before.This is an example of

Suppose the production function for T-shirts can be represented as q = L0.25K0.75.Show that the marginal productivity of labor diminishes in the short run.

Which situation is most likely to exhibit diminishing marginal returns to labor?

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?

Returns to scale refers to the change in output when

Cobb-Douglas production functions can never possess varying returns to scale.

In the Primary Metals industry,it is estimated that the elasticity of output with respect to labor is 0.51 and the elasticity of output with respect to capital is 0.73.These two measures indicate that the primary metals industry is characterized by

If the marginal productivity of labor is constant for all levels of output,then the average productivity of labor

How much do outputs increase when labor and capital increase from 1 to 2 units for the following production function ,q = 10L0.5K0.3?

To say that isoquants are convex is to say that

In the food and kindred products industry,it is estimated that the elasticity of output with respect to labor is 0.43 and the elasticity of output with respect to capital is 0.48.These two measures indicate that the primary metals industry is characterized by

How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L0.5K0.5?

Which of the following statements best describes a production function?

Suppose firms A and B each make T-shirts.Firm A's production function is q = L0.5K0.5.Firm B's production function is q = 1.2 ∗ L0.5K0.5.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of APL and MPL.

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

Let the production function be q = AL^aK^b.The function exhibits decreasing returns to scale if

Suppose the production function for T-shirts can be represented as q = L^0.25K^0.75.Show that the marginal productivity of labor diminishes in the short run.

How much do outputs increase when labor and capital increase from 1 to 2 units for the following production function ,q = 10L^0.5K^0.3?

How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L^0.5K^0.5?

Suppose firms A and B each make T-shirts.Firm A's production function is q = L^0.5K^0.5.Firm B's production function is q = 1.2 ∗ L^0.5K^0.5.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of AP_L and MP_L.