Microeconomics Chapter 6

The short run is: Select one: a. a time period in which at least one input is fixed. b. a time period in which at least one set of outputs has been decided upon. c. however long it takes to produce the planned output. d. less than a year.

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

If input prices are constant, a firm with increasing returns to scale can expect: Select one: a. costs to go up less than double as output doubles. b. costs to double as output doubles. c. to hire more and more labor for a given amount of capital, since marginal product increases. d. to never reach the point where the marginal product of labor is equal to the wage.

a. costs to go up less than double as output doubles.

A production function assumes a given: Select one: a. technology. b. amount of output. c. set of input prices. d. amount of capital and labor.

a. technology

If the isoquants are straight lines, then: Select one: a. the marginal rate of technical substitution of inputs is constant. b. inputs have fixed costs at all use rates. c. only one combination of inputs is possible. d. there are constant returns to scale.

a. the marginal rate of technical substitution of inputs is constant.

The law of diminishing returns assumes that: Select one: a. there is at least one fixed input. b. all inputs are held constant. c. additional inputs are added in smaller and smaller increments. d. all inputs are changed by the same percentage.

a. there is at least one fixed input

Marginal product crosses the horizontal axis (is equal to zero) at the point where: Select one: a. total product is maximized. b. average product is maximized. c. diminishing returns set in. d. output per worker reaches a maximum.

a. total product is maximized

In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences: Select one: a. negative returns to scale. b. decreasing returns to scale. c. constant returns to scale. d. increasing returns to scale.

b. decreasing returns to scale.

The slope of the total product curve is the: Select one: a. average product. b. marginal rate of technical substitution. c. marginal product. d. slope of a line from the origin to the point.

c. marginal product

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called: Select one: a. a production possibility curve. b. an isocost function. c. a production function. d. an isoquant.

c. production function

The marginal rate of technical substitution is equal to the: Select one: a. change in output minus the change in labor. b. slope of the total product curve. c. ratio of the marginal products of the inputs. d. change in output divided by the change in labor.

c. ratio of the marginal products of the inputs.

An isoquant: Select one: a. cannot have a negative slope. b. is a curve that shows all possible output levels that can be produced at the same cost. c. is a curve that shows the maximum total output as a function of the level of labor input. d. is a curve that shows all the combinations of inputs that yield the same total output.

d. is a curve that shows all the combinations of inputs that yield the same total output.

An L-shaped isoquant: Select one: a. is impossible. b. would indicate that capital and labor are perfect substitutes in production. 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.

d. would indicate that capital and labor cannot be substituted for each other in production.