ECON 380, Production MC part 2

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.

A

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

A

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.

A

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

B

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.

B

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

D

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.

A

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.

A

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

A

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.

A

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. -E/∆L c. -∆Q/∆L d. (MPL/∆E)(∆L/MPE)

A

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

B

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.

B

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

D

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.

B

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.

B

Which of the following is constant along an isoquant? a. Productivity of the variable input b. Output c. Cost d. Utility

B

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.

C

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

C

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

C

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.

C

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.

C

Convexity of a curve implies that the (absolute value of the) slope of the curve: a. is zero. b. is constant. c. diminishes along the curve. d. approaches infinity.

C

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.

C

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.

C

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.

C

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.

C

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.

C

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. dis-economies of scale c. increasing returns to scale d. management inefficiencies

C

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.

C

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

C

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.

C

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

C

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

D

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

D

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.

D