Microeconomics

Use the following two statements to answer the question: I. Production functions describe what is technically feasible when the firm operates efficiently. II. The production function shows the least cost method of producing a given level of output. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

I is true, and II is false Production functions describe what is technically feasible when the firm operates efficiently. True The production function shows the least cost method of producing a given level of output. False

A production function assumes a given: A) technology. B) set of input prices. C) ratio of input prices. D) amount of capital and labor.

Technology A production function assumes a given technology.

When labor usage is at 12 units, output is 36 units. From this we may infer that A) the marginal product of labor is 3. B) the total product of labor is 1/3. C) the average product of labor is 3. D) none of the above

The average product of labor is 3.

Technological improvement A) can hide the presence of diminishing returns B) can be shown as a shift in the total product curve. C) allows more output to be produced with the same combination of inputs. D) all of the above are true

all of the above are true Technological improvement can hide the presence of diminishing returns, also can be shown as a shift in the total product curve, also allows more output to be produced with the same combination of inputs.

The marginal rate of technical substitution is equal to the: A) absolute value of the slope of an isoquant. B) the ratio of the marginal products of the inputs. C) change in the output divided by the change in labor. D) ratio of the marginal products of the input

ratio of the marginal products of the inputs. The marginal rate of technical substitution is equal to the ratio of marginal products of the input.

The law of diminishing returns applies to A) the short run only. B) the long run only. C) both the short and long run. D) neither the short nor the long run. E) all inputs, with no reference to the time period.

the short run only The law of diminishing returns applies to the short run only.

Marginal product crosses the horizontal axis (is equal to zero) at the point where A) average product is maximized. B) total product is maximized. C) diminishing returns set in. D) output per worker reaches a maximum. E) All of the above are true.

total product is maximized Marginal product crosses the horizontal axis (is equal to zero) at the point where total product is maximized.

Use the following two statement to answer this question: I. If the marginal product of labor is zero, the total product of labor is at its maximum. II. If the marginal product of labor is at its maximum, the average product is labor is falling. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

I is true, and II is false. If the marginal product of labor is zero, the total product of labor is its maximum. True If the marginal product is at its maximum, the average product is labor is falling. False

An important factor that contributes to labor productivity growth is: A) growth in the capital stock. B) technological change. C) the standard of living. D) growth in capital stock and technological change only. E) growth in capital stock, technological change, and standard of living are correct.

growth in capital stock, technological change only. An important factor that contributes to labor productivity growth is growth in capital stock and technological change only.

A firm's marginal product of labor is 4 and its marginal product of capital is 5. If the firm adds one unit of labor, but does not want its output quantity to change, the firm should A) use five fewer units of capital. B) use 0.8 fewer units of capital. C) use 1.25 fewer units of capital. D) ad 1.25 units of capital.

use 0.8 fewer units of capital. A firm's marginal product of labor is 4 and its marginal product of capital is 5. If the the firm adds one unit of labor, but does not want its output quantity to change, the firm should use 0.8 fewer units of capital.

The function is which shows combinations of inputs that yield the same output is called a(n) A) isoquant curve. B) isocost curve. C) production function. D) production possibilities frontier.

isoquant curve. The function in which shows combinations of inputs that yield the same output is called an isoquant curve.

Which of the following ideas were central to the conclusions drawn by Thomas Malthus in his 1798 "Essay on the Principal of Population"? A) Short-run time period B) Shortage of labor C) Law of diminishing resource availability D) Law of diminishing returns

Law of Diminishing returns Law of Diminishing returns was the central idea to the conclusions drawn by Thomas Malthus in his 1798 "Essay on the Principal of Population".

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: A) the total product. B) an isoquant. C) the average product. D) the marginal product. E) none of the above.

an isoquant. If we take 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 isoquant.

An isoquant A) must be linear. B) cannot have a negative slope. C) is a curve that shows all the combinations of inputs that yield the same total output. D) is a curve that shows the maximum total output as a function of the level of labor input. E) is a curve that shows all possible output levels that can be produced at the same cost.

is a curve that shows all the combination of inputs that yield the same total output. An isoquant is a curve that shows all the combination of inputs that yield the same total output.

When the average product is decreasing, marginal product A) equals the average product. B) is increasing C) exceeds average product D) is decreasing. E) is less than the average product

is less than the average product When the average product is decreasing, marginal product is less than the average product.

Increasing returns to scale in production means A) more than 10% as much of all inputs are required to increase output by 10%. B) less than twice as much of all inputs are required to double output. C) more than twice as much of only one input is required to double output. D) isoquants must be linear

less than twice as much of all inputs are required to double output. Increasing returns to scale production means less than twice as much of all inputs are required to double output.

You are currently using three printing presses and five employees to print 100 sales manuals per hour. If the MRTS at this point is -0.5, then you would be willing to exchange __________ employees for two more printing presses in order to maintain current output. A) zero B) one C) two D) three

one You are currently using three printing presses and five employees to print 100 sales manuals per hour. If the MRTS at this point is -0.5, then you would be willing to exchange one employees for two or more printing presses in order to maintain current output.

The marginal rate of technical substitution is equal to the A) slope of the of the total product curve. B) change in the output minus the change in labor. C) change in output divided by the change in labor. D) ratio of the marginal products of the inputs.

ratio of the marginal products of the inputs. The marginal rate of technical substitution is equal to the ratio of the marginal products of the inputs.

An L-shaped isoquant A) is impossible. B) would indicate that the firm could switch from one output to another costlessly. C) would indicate that the firm could not switch from one output to another. D) would indicate that capital and labor cannot be substituted for each other in production. E) would indicate that capital and labor are perfect substitutes in production.

would indicate that capital and labor cannot be substituted for each other in production. An L-shaped isoquant would indicate that capital and labor cannot be substituted for each other in production.

A function that indicates the maximum output per unit of time a firm can produce, for every combination of inputs with a given technology, is called A) an isoquant B) a production possibility curve C) a production function D) an isocost function

A production function

You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers you employ per hour. As you increased the number of employees hired per hour from three to five, your total output increased by 5 cars to 15 cars per hour. What is the average product of labor at the new levels of labor? A) AP= 3 cars per worker B) AP= 5 cars per worker C) AP= 4 cars per worker D) We do not have enough information to answer this question.

AP= 3 cars per worker

Joe owns a coffee house and produces coffee drinks under the production function q= 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). What is the average product of labor? A) AP= 5 B) AP= 5K C) AP= 5L D) AP= 5K/L

AP=5K

Which of the following inputs are variable in the long run? A) labor B) capital and equipment C) plant size D) all of these

All of these Labor, Capital and Equipment, Plant Size are all variable in the long run

Which would not increase the productivity of labor? A) An increase in the size of the labor force B) An increase in the quality of capital C) An increase in the quantity of capital D) An increase in technology E) An increase in the efficiency of energy

An increase in the size of the labor force Which would not increase the productivity of labor? An increase in the size of the labor force.

Which of the following examples represents a fixed-proportion system with capital and labor inputs? A) Clerical staff and computers B) Airplanes and pilots C) Horse-drawn carriages and carriage drivers D) Clerical staff and computers, Airplanes and pilots, and Horse-drawn carriages and carriage drivers

Clerical staff and computers, Airplanes and pilots and Horse-drawn carriage and carriage drivers (All of the above)

The short run is A) less than a year. B) three years. C) however long it takes to produce the planned output. D) a time period in which at least one input is fixed. E) a time period in which at least one set of outputs has been decided upon.

a time period in which at least one input is fixed. The short run is a time period in which at least one input is fixed

If the law of diminishing returns applies to labor then A) the marginal product of labor must eventually become negative. B) the average product of labor must eventually become negative C) the marginal product of labor must rise and fall as employment rises D) the average product of labor must ruse then fall as employment increases E) after some level of employment, the marginal product of labor must fall.

after some level of employment, the marginal product of labor must fall. If the law of diminishing returns applies to labor then after some level of employment, the marginal product of labor must fall.

In a production process, all inputs are increased by 10%; but the output increases less than 10%. This means the firm experiences A) decreasing returns to the scale. B) constant returns to the scale. C) increasing returns to the scale. D) negative returns to the scale.

decreasing returns to the scale. In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences decreasing returns to the scale.

A production function in which the inputs are perfectly substitutable would have isoquants that are A) convex to the origin B) L-shaped. C) linear. D) concave to the origin.

linear. A production function in which the inputs are perfectly substitutable would have isoquants that are linear.

A production function in which the inputs perfectly substitutable would have isoquants that are A) convex to the origin. B) L-shaped. C) linear. D) concave to the origin.

linear. A production function in which the inputs perfectly substitutable would have isoquants that are linear.

The marginal rate of technical substitution is equal to: A) the absolute value of the slope of an isoquant. B) the ratio of the marginal products of the inputs. C) the ratio of the prices of the inputs. D) absolute value of the slope of an isoquant, the ratio of the marginal products of the inputs, and the ratio of the prices of the inputs. E) absolute value of the slope of an isoquant and the ratio of the marginal products of the inputs.

the absolute value of the slope of an isoquant and the ratio of the marginal products of the inputs. The marginal rate of technical substitution is equal to: the absolute value of the slope of an isoquant and the ratio of the marginal products of the inputs.

One of the likely factors contributing to the fact that labor productivity is higher in the U.S. than in the People's Republic of China is A) China's larger stock of capital. B) the higher capital/labor ratio in China. C) the higher capital/labor ratio in the U.S. D) China's smaller stock of fossil fuels. E) the fact that much labor in the U.S. is in management.

the higher capital/labor ratio in China One of the likely factor contributing to the fact that labor productivity is higher in the U.S. than in the People's Republic of China is the higher capital/labor ratio in China

The law of diminishing return assumes that A) there is at least one fixed input. B) all inputs are added in smaller and smaller increments. C) additional inputs are added in smaller and smaller increments D) all inputs are held constant.

there is at least one fixed input. The law of diminishing returns assumes that there is at least one fixed input.

A straight-line isoquant A) is impossible B) would indicate that the firm could switch from one output to another costlessly. C) would indicate that the firm could not switch from one output to another. D) would indicate that capital and labor cannot be substituted for each other in production. E) would indicate that capital and labor are perfect substitutes in production.

would indicate that capital and labor are perfect substitutes in production. A straight-line isoquant would indicate that capital and labor are perfect substitutes in production.

Writing total output as Q, change in output as delta Q, total labor as L, and change in labor as delta L, the marginal product of labor can be written algebraically as A) DeltaQ* L. B) Q/L C) Delta L/Delta Q D) Delta Q/ Delta L

Delta Q/Delta L

You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. Three employees can generate an average product of 4 cars person in each hour, and five employees can generate an average product of 3 cars per person in each hour. What is the marginal product of labor as you increase the labor from three to five employees? A) MP= 3 cars. B) MP= 1.5 cars. C) MP= 15 cars. D) MP= -1 cars.

MP = 1.5 cars

Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen, A) marginal product is rising. B) marginal product is falling. C) average product is rising. D) average product is falling.

average product is rising. Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen, average product is rising.

For consideration of such issues as labor's productivity growth nationwide, the relevant measure is the A) marginal product of labor. B) average product of labor. C) total product of labor. D) wage. E) cost of capital.

average product of labor For consideration of such issues as labor's productivity growth nationwide, the relevant measure is the average product of labor

As we move downward along a typical isoquant, the slope of the isoquant A) becomes flatter. B) becomes steeper. C) remains constant. D) becomes linear.

becomes flatter. As we move downward along a typical isoquant, the slope of the isoquant becomes flatter.

If the isoquants in an isoquant map are downward sloping but bowed away from the origin (i.e; concave to the origin), then the production technology violates the assumption of: A) technical efficiency. B) free disposal. C) diminishing marginal returns. D) positive average product.

diminishing marginal returns. If the isoquants in an isoquant map are downward sloping but bowed away from the origin (i.e; concave to the origin), then the production technology violates the assumption of diminishing marginal returns.

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. A) labor, capital B) capital, labor C) concrete, gravel D) none of the above

labor, capital A construction company builds roads with machinery (capital K), and labor (L). If we plot 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 {labor} use and low {capital} use.

The slope of the total product curve is the A) average product. B) slope of a line from the origin to the point. C) marginal product. D) marginal rate of technical substitution

marginal product. The slope of the total product curve is the marginal product.

The rate at which one input can be reduced per additional unit of the other input, while holding output constant is measured by the A) marginal rate of substitution. B) marginal rate of technical substitution. C) slope of the isocost curve. D) average product of the input

marginal rate of technical substitution. The rate at which one input can be reduced per additional unit of the other input, while holding output constant is measured by the marginal rate of technical substitution.

The marginal product of an input is A) total product divided by the amount of input used to produce this amount of output. B) the addition to total output that adds nothing to total revenue. C) the addition to total output that adds nothing to profit. D) the addition to total output due to the addition of one unit of all other inputs. E) the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

the addition to total output due to the addition of the last input, holding all other inputs constant. The marginal product of an input is the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

Consider the following statements when answering this question: I. Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels. This technology demonstrates the law of diminishing returns. II. Suppose a semiconductor chip factory uses a technology where the marginal product of labor rises, then is constant and finally falls as employment increases. This technology demonstrates the law of diminishing returns. A) I is true, and II is false. B) I is false, and II is true. C) Both I and II are true. D) Both I and II are false.

I is false, and II is true. Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels. This technology demonstrates the law of diminishing returns. False Suppose a semiconductor chip uses a technology where the marginal product of labor rises, then is constant and finally falls as employment increases. This technology demonstrates the law of diminishing returns. True

Consider the following statements when answering this question: I. Whenever the marginal product of labor curve is a downward curving slope, the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve. II. If a firm uses only labor to produce, and the production function is given by a straight line, then the marginal product of labor always equals the average product of labor as labor employment expands. A) I is true, and II is false. B) I is false, and II is true. C) Both I and II are true. D) Both I and II are false.

I is false, and II is true. Whenever the marginal product of a labor curve is a downward sloping curve, the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve. False If a firm uses only labor to produce, and the production function is given by a straight line, then the marginal product of labor always equals the average product of labor as labor employment expands. True

Use the following statements to answer this question. I. The numerical labels attached to indifference curves are meaningful only in an ordinal way. II. The numerical labels attached to isoquants are meaningful only in an ordinal way. A) both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) both I and II are false.

I is true, and II is false. The numerical labels attached to indifference curves are meaningful only in an ordinal way. True The numerical labels attached to isoquants are meaningful only in an ordinal way. False

Joe owns a coffee house and produces coffee drinks under the production function q= 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). What is the marginal product of labor? A) MP= 5 B) MP= 5K C) MP= 5L D) MP= 5K/L

MP= 5K

The Malthusian dilemma relates to the marginal product in that A) starvation can be averted only if the marginal product is constant. B) because of diminishing marginal product, the amount of food produced by each additional member of the population increases. C) because the diminishing marginal product, the amount of food produced by each additional member of the population decreases. D) because of diminishing marginal product, the wage falls as population decreases E) because of diminishing average product , the population will not have additional capital to work with.

because of diminishing marginal product, the amount of food produced by each additional member of the population decreases. The Malthusian dilemma relates to the marginal product in that because of diminishing marginal product, the amount of food produced by each additional member of the population decreases.

With increasing return to scale, isoquants for unit increases in output become A) farther and farther apart. B) closer and closer together. C) the same distance apart. D) none of the above.

closer and closer together With increasing returns to scale, isoquants for unit increases in output become closer and closer together.