Question 1

The marginal rate of technical substitution (RTS)of labor for capital measures:&#10;A)the amount by which capital input can be reduced while holding quantity produced constant when one more unit of labor is used.&#10;B)the amount by which labor input can be reduced while holding quantity produced constant when one more unit of capital is used.&#10;C)the ratio of total labor to total capital.&#10;D)the ratio of total capital to total labor.

Accepted Answer

The marginal rate of technical substitution (RTS) of labor for capital measures by how much the capital input can be decreased while holding the quantity of output constant when one more unit of labor is used. Therefore, A is the correct choice. B is the opposite of the definition of RTS, while C and D are unrelated to the concept of RTS.

Question 2

A firm's isoquant shows:&#10;A)the amount of labor needed to produce a given level of output with capital held constant.&#10;B)the amount of capital needed to produce a given level of output with labor held constant.&#10;C)the various combinations of capital and labor that will produce a given amount of output.&#10;D)none of the above.

Accepted Answer

An isoquant represents all the possible combinations of inputs (capital and labor) that can produce a given level of output. Therefore, choice C is the correct answer. Choice A and B only represent the relationship between labor and output or capital and output, respectively, but not the combination of inputs needed to achieve a specific level of output.

Question 3

The marginal physical productivity of labor is defined as:&#10;A)a firm's total output divided by total labor input.&#10;B)the extra output produced by employing one more unit of labor while allowing other inputs to vary.&#10;C)the extra output produced by employing one more unit of labor while holding other inputs constant.&#10;D)the extra output produced by employing one more unit of capital while holding labor input constant.

Accepted Answer

The marginal physical productivity of labor measures the additional amount of output that results from the employment of one more unit of labor while holding other inputs constant. Choice A is incorrect because it does not take into account the effect of changes in labor input on output. Choice B is partially correct, but it does not specify that other inputs are held constant, which is a critical condition for measuring the marginal productivity of labor. Choice D is incorrect because it refers to the marginal productivity of capital, not labor.

Question 4

The production function  &#10;Exhibits:&#10;A)increasing returns to scale and diminishing marginal products for both k and l.&#10;B)increasing returns to scale and diminishing marginal product for l only.&#10;C)increasing returns to scale but no diminishing marginal productivities.&#10;D)decreasing returns to scale.

Accepted Answer

The answer of The production function  &#10;Exhibits:&#10;A)increasing returns to...

Question 5

Suppose the production function for good q is given by
Where k and l are capital and labor inputs.Consider three statements about this function:
I.the function exhibits constant returns to scale.
II.the function exhibits diminishing marginal productivities to all inputs.
III.the function has a constant rate of technical substitution.
Which of these statements is true?

A)All of them
B)None of them
C)I and II but not III
D)I and III but not II

Accepted Answer

The answer of Suppose the production function for good q...

Question 6

Which of the following production functions exhibits a constant elasticity of substitution?&#10;A)q = 3k + 2l&#10;B)  &#10;C)  &#10;D)All of the above have a constant elasticity of substitution.

Accepted Answer

The answer of Which of the following production functions exhibits...

Question 7

If more and more labor is employed while keeping all other inputs constant,the marginal physical productivity of labor will eventually:&#10;A)increase.&#10;B)decrease.&#10;C)remain constant.&#10;D)cannot tell from the information provided.

Accepted Answer

The law of diminishing marginal returns states that as more and more of a variable input (such as labor) is added while keeping other inputs constant, the marginal product of that input will eventually begin to decline. Therefore, the marginal physical productivity of labor will decrease.

Question 8

Consider the production function  &#10;For this function to have diminishing marginal productivities and increasing returns to scale,it must be the case that:&#10;A)    &#10;B)    &#10;C)    &#10;D)

Accepted Answer

The answer of Consider the production function  &#10;For this...

Question 9

A production function may exhibit:&#10;A)constant returns to scale and diminishing marginal productivities to all inputs.&#10;B)constant returns to scale and diminishing marginal productivities to all but one input,but at least one input must have a constant marginal productivity.&#10;C)constant returns to scale and diminishing marginal productivity to at most one input.&#10;D)constant returns to scale and diminishing marginal productivities for no inputs.

Accepted Answer

A production function can exhibit constant returns to scale, meaning that if all inputs are increased by a certain percentage, output increases by the same percentage, while also having diminishing marginal productivities for all inputs, which means that adding an additional unit of any input will result in a smaller increase in output.

Question 10

Graphically,the average productivity of labor is illustrated by:&#10;A)the slope of the total product curve at the relevant point.&#10;B)the slope of the marginal productivity curve at the relevant point.&#10;C)the negative of the slope of the marginal productivity curve at the relevant point.&#10;D)the slope of the chord connecting the origin with the relevant point on the total output curve.

Accepted Answer

The average productivity of labor is illustrated graphically by the slope of the chord connecting the origin with the relevant point on the total output curve. This slope represents the average output per unit of labor input.

Question 11

For a fixed proportion production function,at the vertex of any of the (L-shaped)isoquants the marginal productivity of either input is:&#10;A)constant.&#10;B)zero.&#10;C)negative.&#10;D)a value that cannot be determined.

Accepted Answer

The answer of For a fixed proportion production function,at the...

Question 12

The production function  :&#10;A)exhibits constant returns to scale and constant marginal productivities for k and l.&#10;B)exhibits diminishing returns to scale and diminishing marginal productivities for k and l.&#10;C)exhibits constant returns to scale and diminishing marginal productivities for k and l.&#10;D)exhibits diminishing returns to scale and constant marginal productivities for k and l.

Accepted Answer

The answer of The production function  :&#10;A)exhibits constant returns...

Question 13

The average productivity of labor reaches its maximum:&#10;A)at the point of inflection of the total product curve.&#10;B)where the slope of the total product curve is steepest.&#10;C)where the slope of the total product curve is zero.&#10;D)where marginal and average productivity are equal.

Accepted Answer

The answer of The average productivity of labor reaches its...

Question 14

The marginal physical productivity of labor is:&#10;A)the slope of the total output curve at the relevant point.&#10;B)the negative of the slope of the total output curve at the relevant point.&#10;C)the slope of the line connecting the origin with the relevant point on the total output curve.&#10;D)the negative of the slope of the line connecting the origin with the relevant point on the total output curve.

Accepted Answer

The answer of The marginal physical productivity of labor is:&#10;A)the...

Deck 7: Production Functions