Deck 8: Production

Question 1

The law of diminishing returns to an input says that if other inputs are fixed

A)output eventually will decrease with increases of the variable input.
B)change in output will eventually decrease with increases in the variable input.
C)revenue will eventually decrease with increases in the variable input.
D)the variable input will eventually decrease with more output.

Answer 1

B

Question 2

If equal amounts of a variable input are sequentially added to the fixed input in a typical production function,

A)the increments to output will decrease first and then increase.
B)the additions to output will be constant.
C)increments to output will increase indefinitely.
D)increments to output will first increase at an increasing rate and then at a decreasing rate.

Answer 2

D

Question 3

In a typical production function, the relevant factors of production are land, labor, capital, and

A)raw materials.
B)technology.
C)entrepreneurship.
D)resources.

Answer 3

C

Question 4

The nineteenth-century British economist Thomas Malthus argued that the law of diminishing returns implied that

A)capital would increase relative to labor.
B)technological change would grow at an increasing pace.
C)eventual misery would befall the human race.
D)raw materials would eventually run out.

Question 5

The average product of a variable input

A)decreases at an increasing rate.
B)constantly rises over the relevant range of production.
C)is the change in the total product that occurs when the variable input increases one unit.
D)is defined as the total product divided by the quantity of the variable input.

Question 6

The short run is defined as that period of time during which

A)one or more inputs cannot be freely varied.
B)all inputs are variable.
C)all inputs are fixed.
D)labor is counted as a fixed input.

Question 7

In a short-run production function before diminishing returns set in, both MPL and APL will have

A)positive slopes and MPL will lie above APL.
B)positive slopes and APL will lie above MPL.
C)negative slopes and MPL will lie above APL.
D)negative slopes and APL will lie above MPL.

Question 8

When Thomas Malthus argued that the prospects for human flourishing were gloomy and that starvation would eventually become the normal human condition, he was assuming that

A)diseconomies of scale will become more commonplace.
B)diminishing returns to production will become more apparent.
C)epidemics will overpower the many technological advances that he expected.
D)self-interest will become more intense and religion will cease to be an influential force in society.

Question 9

If capital and labor are perfect substitutes in a production function, the isoquants for this function will be

A)concave from above.
B)convex from above.
C)a straight line.
D)any one of these depending on the particular combination of labor and capital employed.

Question 10

Geometrically, the marginal product

A)is the slope of the line joining the origin to the corresponding point on the total product curve.
B)at any point is the slope of the total product curve at that point.
C)is that point at which the total product curve exhibits diminishing returns.
D)is the slope of the average product curve.

Question 11

Geometrically, the average product

A)is the slope of the line joining the origin to the specified point on the total product curve.
B)at any point is the slope of the total product curve at that point.
C)is that point at which the total product curve exhibits diminishing returns.
D)falls at low levels of input use and rises at high levels of input use.

Question 12

Which is true?

A)Production functions consider only the value added part of a particular production process.
B)Production functions are as subjective as utility functions.
C)Production functions count raw materials, but not labor, as inputs into the production process.
D)Production functions do not count technology into the production process.

Question 13

In a typical short-run production function, before diminishing returns set in, the slope of the total product curve

A)is decreasing.
B)is increasing.
C)rises and then falls before diminishing returns sets in.
D)falls and then rises before diminishing returns sets in.

Question 14

In a value added production function like the one used in the text, raw materials are

A)counted as inputs in a production process.
B)called intermediate goods.
C)are counted in the final product of any production process as part of the value of output.
D)called final goods.

Question 15

In the long run

A)all inputs are fixed.
B)only capital inputs are fixed.
C)all intermediate goods are fixed.
D)all inputs are variable.

Question 16

When the marginal product curve lies above the average product curve

A)the average product curve must be falling.
B)the total product curve must be falling.
C)the average product curve must be rising.
D)the marginal product curve must be rising.

Question 17

A fixed input is an input that

A)can never be varied.
B)cannot be varied in the short-run.
C)is fixed only for some quantities of output.
D)can never be moved from one location to the next.

Question 18

The marginal product of a variable input is

A)zero at the point of diminishing returns.
B)the change in the average product that occurs when the variable input is increased one unit.
C)the change in the total product that occurs in response to a unit change in the variable input.
D)the second derivative of the total product function.

Question 19

If a chef and her equipment transform $50 worth of raw foodstuff into a meal with a total value of $150, the resulting output would be

A)measured as the $150 total value.
B)referred to as an intermediate product.
C)measured as the $100 of value added.
D)measured as $200 of value added.

Question 20

Diminishing returns begin to occur when the

A)slope of the ray from the origin reaches a maximum.
B)total product curve reaches a maximum.
C)slope of the total product curve reaches a maximum.
D)marginal product curve intersects the average product curve.

Question 21

The general rule for allocating a productive resource efficiently across different production activities of the same product, like fishing boats in the text case example, is to choose the allocation for which the

A)average product of the resource is the same in every activity.
B)marginal product of the resource is the same in every activity.
C)total product of the resource is the same in every activity.
D)average product is equal to the marginal product in every activity.

Question 22

For production functions with decreasing returns to scale, a proportional increase in output

A)requires a less-than-proportional growth in all inputs.
B)requires a more-than-proportional growth in all inputs.
C)exhibits diminishing returns.
D)requires proportional growth in all inputs.

Question 23

In conceptual production functions, technological change is

A)treated like an addition to the capital stock.
B)treated as a movement upward along a given production function.
C)a factor that eliminates diminishing returns to a production function.
D)not considered and is therefore assumed to be constant in all deliberations.

Question 24

On an isoquant, the MRTS is defined as

A) $\left| \frac { \Delta \mathrm { K } } { \Delta \mathrm { L } } \right|$ .
B)MPK/MPL at the relevant point on the isoquant.
C)MPL * MPK.
D)MP + MPL.

Question 25

On this chapter quiz for this course you can study for up to four hours. If you don't study at all you will get a 70. One hour would give you an 80, the second hour increased your score to 89, the third to 92. If you studied the fourth hour your score would be 87. In which hour did diminishing returns set in?

A)The first because the score was the lowest of the studying options.
B)The second because your gain is less than the previous hour.
C)The third because your score peaked there.
D)The fourth because you had a drop in points in this hour.

Question 26

If the owner of an ice-cream stand told a student looking for summer work that he would not hire him even if he worked for nothing, we can infer that

A)the marginal product of the labor is zero or less.
B)the average product of labor is rising.
C)the marginal product of labor is rising.
D)the owner is producing at the lowest cost.

Question 27

Returns to scale refers to

A)what happens to output when at least one input is fixed and one is varied.
B)what happens to output when all inputs are held fixed.
C)what happens to output when all inputs are varied in some proportion.
D)the law of diminishing returns.

Question 28

When the marginal product curve lies below the average product curve,

A)the average product curve must be falling.
B)the total product curve must be falling.
C)the average product curve must be rising.
D)the marginal product curve must be rising.

Question 29

The isoquant mapping for perfect complements in production is

A)L-shaped.
B)a straight line.
C)a ray passing through the origin.
D)concave.

Question 30

From an isoquant map, one can illustrate diminishing returns to production by

A)observing the slope of the isoquant as one moves outward on the labor axis but stays at the same point on the capital axis.
B)following the curvature of an individual isoquant.
C)moving from isoquant to isoquant along a ray from the origin.
D)constructing a positively sloped isoquant.

Question 31

For any constant returns production function, the isoquants for Q = 1, Q = 2, Q = 3, etc. will

A)all be inversely proportional to the inputs.
B)exhibit diminishing returns in the long run.
C)be straight lines.
D)be equally spaced, in that the distance between Q = 1 and Q = 2 is the same as Q = 2 and Q = 3, etc.

Question 32

Say you are the owner of a Pizza place. You know that when you produce 10 pizzas, the average product of each of your workers is 10, and the marginal product of your last worker is 15. From this information you know that

A)the marginal product is increasing.
B)the average product is increasing.
C)the average product is decreasing.
D)the marginal product is decreasing.

Question 33

Suppose you are using 10 units of labor in your short-run production process. At this point, the average product of your labor is 10, and the marginal product of the last unit of labor was 14. Given this, we know that the

A)average product of labor must be increasing.
B)average product of labor must be decreasing.
C)marginal product of labor must be increasing.
D)marginal product of labor must be decreasing.

Question 34

Which of the following statements about isoquant maps is true?

A)They can illustrate diminishing returns to production only when they have numerical values attached.
B)They cannot illustrate economies of scale unless some numerical values are attached.
C)They always have positive slope.
D)They always have negative slope.

Question 35

The rate at which one input can be exchanged for another without altering output is called

A)the slope of the total product curve.
B)the marginal rate of technical substitution.
C)the slope of the marginal product of labor.
D)the law of diminishing returns of labor.

Question 36

If the contribution to output of an additional unit of the variable input exceeds the average contribution of the variable inputs used,

A)the average contribution must rise.
B)the average contribution must fall.
C)the total product will begin to decline.
D)the average product will be at its minimum.

Question 37

A production function for which proportional changes in all inputs leads to a more-than-proportional change in output is said to exhibit

A)diminishing returns.
B)decreasing returns to scale.
C)constant returns to scale.
D)increasing returns to scale.

Question 38

Say you own a Mexican place that produces, among other things, Mexican burritos. Your production of burritos is given by the equation Q = 6KL2, where Q is the amount of burritos, K is the amount of capital and L is the amount of labor. How many workers would you need to use in order to minimize the cost of producing 100 burritos when the capital is, K, is 20?

A)1
B)2
C)4
D)0

Question 39

Suppose that at a firm's current level of production the marginal product of capital is equal to 10 units, while the marginal rate of technical substitution between capital and labor is 2. Given this, we know the marginal product of labor must be

A)5.
B)20.
C)10.
D)It is not possible to say with the information given in the problem

Question 40

Say you own a Mexican place that produces, among other things, Mexican burritos. The marginal product of your last worker was 5. If the marginal rate of technical substitution between capital and labor is 0.5, then marginal product of capital is

A)10.
B)5.
C)1.
D)we can't say with the information given

Question 41

If climate change starts creating earthquakes, storms, droughts and all manner of obstacles to production operations, the effects can be shown on effected production function graphs by

A)eliminating the increasing returns portion of the short run production function.
B)lowering the short run production function and reducing the numbers on each isoquant.
C)changing the curves of the isoquants to straight lines.
D)eliminating long run production functions because they are irrelevant.

Question 42

(Appendix) The defining characteristics of increasing returns to scale may be summarized as

A)F(cK,cL) > cF(K,L).
B)F(cK,cL) = cF(K,L).
C)F(cK,cL) < cF(K,L).
D)Q = min(aK,aL).

Question 43

What will happen to a typical isoquant if robots become increasingly good at doing manual and mental labor?

A)Isoquants will become much steeper.
B)Isoquants will not change but movement will occur upward on the curve.
C)Isoquants will become much flatter.
D)Isoquants will become a negatively sloped straight line.

Question 44

Several years ago while teaching in Russia, I was using a production function like the ones used in this text. Output is a function of labor, capital and technology. One professor asked me how I could talk about production without including all the inputs that go into the process. Write a response to this professor from what you know of a production function.
You should focus on the concept of value added production.

Question 45

(Appendix) In the production function Q = 10L^1/2K^1/2, is diminishing returns a characteristic of this production function?

Question 46

Sketch graph a standard short-run production function, and identify on it the points where the average product peaks, the marginal product peaks, the marginal product reaches zero, and the average and marginal product intersect.

Question 47

Sketch a long-run production function with isoquants numbered so that the graph clearly shows increasing returns to scale over the entire range of production.

Question 48

In the production of bicycles an increase of 2 percent in the level of capital and labor respectively will generate an increase of 1 percent in the production of bicycles. From this information we know that the production of bicycles exhibits

A)diminishing marginal returns.
B)decreasing returns to scale.
C)increasing returns to scale.
D)constant returns to scale.

Question 49

(Appendix) Suppose the production function for widgets is Q = (KL)^½. If capital is fixed at 4 units, what is the marginal product of labor when you produce 10 units of output?

A)0.4
B)1
C)1.5
D)0.2

Question 50

(Appendix) In the production function Q = 10L^1/2K^1/2, calculate the slope of the isoquant when the entrepreneur is producing efficiently with 9 laborers and 16 units of capital. (Hint: The slope of the isoquant = the ratio of the marginal product of labor to the marginal product of capital.)

Question 51

(Appendix) In the production function Q = 10L^1/2K^1/2, if the inputs are quadrupled, are there economies of scale?

Question 52

One of the main differences between production processes among different parts of the world has to do with the quality of capital. Many development economists point out the fact that high-income countries usually have access to more and better capital than less-developed counties. What would be the effect of this difference in terms of isoquants used by high-income countries versus the isoquants used by low-income countries? Use an isoquant map in order to illustrate your answer.

Question 53

(Appendix) In the production function Q = 10L^1/2K^1/2 calculate the marginal product equations of both inputs.

Question 54

(Appendix) A daily production function for calculators is Q = 12L² - L³. Show all your work for the following questions.
a) What is the marginal product equation for labor?
b) What is the APL function?

Question 55

(Appendix) Which of the following production functions exhibits increasing returns to scale?

A)Q = K^1/2L^l/2
B)Q = K^l/2L^2/3
C)Q = K^l/4L^l/3
D)Q = K/L

Question 56

Karl has a home business that consists of only himself and his computer. If he were to analyze his operations in the form of a long run production function his isoquants would

A)be straight lines with a negative slope.
B)be L shaped.
C)be concave from above.
D)be straight lines with a positive slope.