Question 1

A firm has a production function f(x, y) = 1.40(x0.60 + y0.60)2 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale if x + y > 1 and decreasing returns to scale otherwise. 
E)  increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale if x + y > 1 and decreasing returns to scale otherwise. 
E)  increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1.

Question 2

The UJava espresso stand needs two inputs, labor and coffee beans, to produce its only output, espresso. Producing an espresso always requires the same amount of coffee beans and the same amount of time. Which of the following production functions would appropriately describe the production process at UJava, where B represents ounces of coffee beans, and L represents hours of labor?

Accepted Answer

A)  Q = min(2B, 60L). 
B)  Q = B0.40L0.60. 
C)  Q =+. 
D)  Q = 0.5B + 0.5L0.5. 
E)  None of the above. 
A)  Q = min(2B, 60L). 
B)  Q = B0.40L0.60. 
C)  Q =+. 
D)  Q = 0.5B + 0.5L0.5. 
E)  None of the above.

Question 3

The production function f(x, y) = x + y has constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 4

If the production function is f(x, y) = min{ 2x + y, x + 2y}, then there are constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that the production function is f(x1, x2) = (xa1 + xa2)b, where a and b are positive constants. For what values of a and b is there a diminishing technical rate of substitution?

Accepted Answer

A)  For any value of a if b  b 
D)  For any value of b if a < 1 
E)  None of the above. 
A)  For any value of a if b  b 
D)  For any value of b if a < 1 
E)  None of the above.

Question 6

A firm has a production function f(x, y) = 1.80(x0.80 + y0.80)3 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

Accepted Answer

A)  increasing returns to scale if x + y > 1 and decreasing returns to scale otherwise. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale. 
E)  increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1. 
A)  increasing returns to scale if x + y > 1 and decreasing returns to scale otherwise. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale. 
E)  increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1.

Question 7

A firm has the production function f(x, y) = x1.40y1. This firm has

Accepted Answer

A)  decreasing returns to scale and diminishing marginal products for factor x. 
B)  increasing returns to scale and decreasing marginal product of factor x. 
C)  decreasing returns to scale and increasing marginal product for factor x. 
D)  constant returns to scale. 
E)  None of the above. 
A)  decreasing returns to scale and diminishing marginal products for factor x. 
B)  increasing returns to scale and decreasing marginal product of factor x. 
C)  decreasing returns to scale and increasing marginal product for factor x. 
D)  constant returns to scale. 
E)  None of the above.

Question 8

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{   , y2,   }. If the amount of each input is multiplied by 3, its output will be multiplied by

Accepted Answer

A)  0.30. 
B) 3 
C) 9 
D) 27 
E)  The answer depends on the original choice of x, y, and z. 
A)  0.30. 
B) 3 
C) 9 
D) 27 
E)  The answer depends on the original choice of x, y, and z.

Question 9

If the production function is f(x, y) = x + min{x, y}, then there are constant returns to scale.

Accepted Answer

A) True 
 B)False

Question 10

On separate axes, draw typical production isoquants for each of the following production functions.
a. f(x, y) = min{ 2x, x + y}. 
b. f(x, y) = xy. 
c. f(x, y) = x + min{x, y}. 
"d. (x, y) = x +   ." 
a. f(x, y) = min{ 2x, x + y}.
b. f(x, y) = xy.
c. f(x, y) = x + min{x, y}.
d. (x, y) = x +   .

Accepted Answer

a. The isoquants have a kink at the line

Question 11

The production function Q = 50K0.25L0.75 exhibits

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing, then diminishing returns to scale. 
E)  negative returns to scale. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing, then diminishing returns to scale. 
E)  negative returns to scale.

Question 12

A firm has the production function f(X, Y) =   , where X is the amount of factor x used and Y is the amount of factor y used. On a diagram we put X on the horizontal axis and Y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of 23. The straight line we drew

Accepted Answer

A)  is vertical. 
B)  is horizontal. 
C)  is a ray through the origin with slope 3. 
D)  is a ray through the origin with slope 4. 
E)  has a negative slope. 
A)  is vertical. 
B)  is horizontal. 
C)  is a ray through the origin with slope 3. 
D)  is a ray through the origin with slope 4. 
E)  has a negative slope.

Question 13

A production function has well-defined marginal products at every input combination. If factor x is shown on the horizontal axis and factor y is shown on the vertical axis, the slope of the isoquant through a point (x*, y*) is the negative of the ratio of the marginal product of x to the marginal product of y.

Accepted Answer

A) True 
 B)False

Question 14

A firm has the production function f(X, Y) =   , where X is the amount of factor x used and Y is the amount of factor y used. On a diagram we put X on the horizontal axis and Y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of -9. The straight line we drew

Accepted Answer

A)  is horizontal. 
B)  is a ray through the origin with slope 3. 
C)  is vertical. 
D)  is a ray through the origin with slope 4. 
E)  has a negative slope. 
A)  is horizontal. 
B)  is a ray through the origin with slope 3. 
C)  is vertical. 
D)  is a ray through the origin with slope 4. 
E)  has a negative slope.

Question 15

A firm uses only two inputs to produce its output. These inputs are perfect substitutes. This firm

Accepted Answer

A)  must have increasing returns to scale. 
B)  must have constant returns to scale. 
C)  could have increasing returns to scale, constant returns to scale, or decreasing returns to scale. 
D)  must have decreasing returns to scale. 
E)  must have decreasing returns to scale in the short run and constant returns to scale in the long run. 
A)  must have increasing returns to scale. 
B)  must have constant returns to scale. 
C)  could have increasing returns to scale, constant returns to scale, or decreasing returns to scale. 
D)  must have decreasing returns to scale. 
E)  must have decreasing returns to scale in the short run and constant returns to scale in the long run.

Question 16

It is possible to have decreasing marginal products for all inputs, and yet have increasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 17

If there is one input used in production and if there are decreasing returns to scale, then the marginal product for the input will be diminishing.

Accepted Answer

A) True 
 B)False

Question 18

A firm has the production function f(x, y) = x1.40y0.90. This firm has

Accepted Answer

A)  decreasing returns to scale and increasing marginal product for factor x. 
B)  constant returns to scale. 
C)  increasing returns to scale and decreasing marginal product of factor x. 
D)  decreasing returns to scale and diminishing marginal products for factor x. 
E)  None of the above. 
A)  decreasing returns to scale and increasing marginal product for factor x. 
B)  constant returns to scale. 
C)  increasing returns to scale and decreasing marginal product of factor x. 
D)  decreasing returns to scale and diminishing marginal products for factor x. 
E)  None of the above.

Question 19

A firm has the production function f(x1, x2) = x11x0.502. The isoquant on which output is   has the equation

Accepted Answer

A)  x2 = 30x-21. 
B)  x2 = 30x21. 
C)  x2 = 30x-0.501. 
D)  = 2. 
E)  x1 = 0.50x-0.502. 
A)  x2 = 30x-21. 
B)  x2 = 30x21. 
C)  x2 = 30x-0.501. 
D)  = 2. 
E)  x1 = 0.50x-0.502.

Question 20

For each of the following production functions, comment on the ability to substitute capital for labor.
a. Q = K + L. 
b. Q = K0.5L0.5. 
c. Q = min(K, L).

Accepted Answer

a. Perfect substitut

Exam 17: Technology

A firm has a production function f(x, y) = 1.40(x0.60 + y0.60)2 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

The production function f(x, y) = x + y has constant returns to scale.

If the production function is f(x, y) = min{ 2x + y, x + 2y}, then there are constant returns to scale.

Suppose that the production function is f(x1, x2) = (xa1 + xa2)b, where a and b are positive constants. For what values of a and b is there a diminishing technical rate of substitution?

A firm has a production function f(x, y) = 1.80(x0.80 + y0.80)3 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

A firm has the production function f(x, y) = x1.40y1. This firm has

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{ , y2, }. If the amount of each input is multiplied by 3, its output will be multiplied by

If the production function is f(x, y) = x + min{x, y}, then there are constant returns to scale.

On separate axes, draw typical production isoquants for each of the following production functions. a. f(x, y) = min{ 2x, x + y}. b. f(x, y) = xy. c. f(x, y) = x + min{x, y}. "d. (x, y) = x + ." a. f(x, y) = min{ 2x, x + y}. b. f(x, y) = xy. c. f(x, y) = x + min{x, y}. d. (x, y) = x + .

The production function Q = 50K0.25L0.75 exhibits

A firm uses only two inputs to produce its output. These inputs are perfect substitutes. This firm

It is possible to have decreasing marginal products for all inputs, and yet have increasing returns to scale.

If there is one input used in production and if there are decreasing returns to scale, then the marginal product for the input will be diminishing.

A firm has the production function f(x, y) = x1.40y0.90. This firm has

A firm has the production function f(x1, x2) = x11x0.502. The isoquant on which output is has the equation

For each of the following production functions, comment on the ability to substitute capital for labor. a. Q = K + L. b. Q = K0.5L0.5. c. Q = min(K, L).

Budget Constraint

A: Budget Constraint

Preferences

A: Preferences

Utility

A: Utility

Choice

A: Choice

Demand

A: Demand

Revealed Preference

A: Revealed Preference

Slutsky Equation

A: Slutsky Equation

Buying and Selling

A: Buying and Selling

Intertemporal Choice

A: Intertemporal Choice

Asset Markets

A: Asset Markets

Uncertainty

A: Uncertainty

Risky Assets

A: Risky Assets

Consumers Surplus

A: Consumers Surplus

Market Demand

A: Market Demand

Equilibrium

A: Equilibrium

Auctions

A: Auctions

A: Technology

Profit Maximization

A: Profit Maximization

Cost Minimization

A: Cost Minimization

Cost Curves

A: Cost Curves

Firm Supply

A: Firm Supply

Industry Supply

A: Industry Supply

Monopoly

A: Monopoly

Monopoly Behavior

A: Monopoly Behavior

Factor Markets

A: Factor Markets

Oligopoly

A: Oligopoly

Game Theory

A: Game Theory

Game Applications

A: Game Applications

Behavioral Economics

Exchange

A: Exchange

Production

A: Production

Welfare

A: Welfare

Externalities

A firm has a production function f(x, y) = 1.40(x^0.60 + y^0.60)² whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

Suppose that the production function is f(x₁, x₂) = (x^a₁ + x^a₂)b, where a and b are positive constants. For what values of a and b is there a diminishing technical rate of substitution?

A firm has a production function f(x, y) = 1.80(x^0.80 + y^0.80)³ whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has

A firm has the production function f(x, y) = x^1.40y¹. This firm has

A firm uses 3 factors to produce its output. Its production function is f(x, y, z) = min{ , y², }. If the amount of each input is multiplied by 3, its output will be multiplied by

The production function Q = 50K^0.25L^0.75 exhibits

A firm has the production function f(x, y) = x^1.40y^0.90. This firm has

A firm has the production function f(x₁, x₂) = x¹¹x^0.50₂. The isoquant on which output is has the equation

For each of the following production functions, comment on the ability to substitute capital for labor. a. Q = K + L. b. Q = K^0.5L^0.5. c. Q = min(K, L).