Question 1

In a production process,an excessive amount of the variable input relative to the fixed input is being used to produce the desired output.This statement is true for:

Accepted Answer

In stage III of the production process, the amount of variable input used increases disproportionately relative to the fixed input, leading to decreased efficiency and increased costs. This stage is characterized by an excessive amount of the variable input for the desired output.

Question 2

The following is a Cobb-Douglas production function: Q = 1.75K^0.5∙L^0.5.What is correct here?

Accepted Answer

This production function displays constant returns to scale because when all inputs are multiplied by a factor of t, the output Q will also multiply by t^(1.75), which means that Q will increase by the same factor as the inputs, and therefore the ratio of output and inputs remains constant. Neither A nor B can be correct because the exponents on all input factors are not equal to 1, so changes in inputs will not result in proportional changes in output. The fact that some exponents are greater than 1 means that this production function displays increasing returns to scale; the fact that some exponents are less than 1 means that this production function displays decreasing returns to scale.

Question 3

The marginal product is defined as:

Accepted Answer

Marginal product refers to the change in total output resulting from the use of one additional unit of a variable input. Therefore, option B is the correct definition of marginal product.

Question 4

In production and cost analysis,the short run is the period of time in which one (or more)of the resources employed in the production process is fixed or incapable of being varied.

Accepted Answer

In the short run, at least one resource is fixed and cannot be varied, while the long run allows for all resources to be varied. This is a fundamental concept in production and cost analysis.

Question 5

What's true about both the short-run and long-run in terms of production and cost analysis?

Accepted Answer

All of the statements are true about both the short-run and long-run in terms of production and cost analysis. Option A is true for the short-run where there is at least one fixed resource. Option B is true for the long-run where all factors of production are variable. Option C is also true, as the time horizon determines the flexibility of the inputs. Option D is also true, as the law of diminishing returns is based on some factors of production being fixed, as they are in the short-run. Therefore, option E is the correct answer.

Question 6

The marginal rate of technical substitution may be defined as all of the following except:

Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which one input can be substituted for another input to maintain the same level of output. It is equal to the negative slope of the isoquant at any given point, and it can also be calculated as the ratio of the marginal products of the inputs. However, it is not the rate at which all combinations of inputs have equal total costs. This is a different concept known as the isocost curve. Therefore, option C is the incorrect statement regarding MRTS. Option E is also incorrect because both B and C are not correct statements.

Question 7

If the marginal product of labor is 100 and the price of labor is 10,while the marginal product of capital is 200 and the price of capital is $30,then what should the firm?

Accepted Answer

The firm should use relatively more labor because the marginal product of labor (MPL) is greater than the marginal product of capital (MPK) divided by the price of capital (P(K))/price of labor (P(L)), or MPL > MPK/P(K)/P(L). In this case, we have MPL = 100 and MPK/P(K)/P(L) = 200/30/10 = 0.67, indicating that labor is more efficient than capital. Therefore, the firm should use relatively more labor to maximize its output.

Question 8

Which of the following is never negative?

Accepted Answer

Average product cannot be negative since it is calculated as total output divided by the quantity of input used, and both total output and quantity of input used are non-negative.

Question 9

The law of diminishing marginal returns:

Accepted Answer

The answer of The law of diminishing marginal returns:
...

Question 10

Marginal revenue product is:

Accepted Answer

The answer of Marginal revenue product is:
...

Question 11

The Cobb-Douglas production function is: Q = 1.4*L^0.6*K^0.5.What would be the percentage change in output (%∆Q)if labor grows by 3.0% and capital is cut by 5.0%? [Hint: %∆Q = (E_L * %∆L)+ (E_K * %∆K)]

Accepted Answer

Using the given formula: %∆Q = (E_L * %∆L) + (E_K * %∆K) E_L = 1.4*(1.0^1)*1.0^0.6*(1.0)^0 = 1.4 E_K = 1.4*(1.0^1)*1.0^0.5*(-0.05)^1 = -0.098 %∆L = 3% %∆K = -5% Substituting the values: %∆Q = (1.4*3%) + (-0.098*5%) = 0.042 - 0.005 = -0.037 = -0.70% Therefore, the percentage change in output would be -0.70%. The correct answer is option C.

Question 12

The isoquants for inputs that are perfect substitutes for one another consist of a series of:

Accepted Answer

Isoquants for inputs that are perfect substitutes are straight lines with a constant slope, which means they are parallel to each other.

Question 13

Concerning the maximization of output subject to a cost constraint,which of the following statements (if any)are true?

Accepted Answer

All the statements are true regarding the maximization of output subject to a cost constraint. At the optimal input combination, the slope of the isoquant (which represents the rate at which one input can be substituted for another without changing the output level) must equal the slope of the isocost line (which represents all combinations of inputs that can be purchased for a given total cost). This condition ensures that the firm is using its resources in the most efficient way possible. The optimal solution indeed occurs at the point where the isoquant is tangent to the isocost line, indicating the most efficient combination of inputs for a given level of output and cost. This point typically lies within the feasible region of input combinations, but the statement about the boundary of the feasible region is more related to the concept of constraints in optimization problems rather than a specific characteristic of the optimal solution in the context of isoquants and isocost lines.

Question 14

Suppose you have a Cobb-Douglas function with a capital elasticity of output (α)of 0.28 and a labor elasticity of output (β)of 0.84.What statement is correct?

Accepted Answer

The sum of the capital elasticity (0.28) and labor elasticity (0.84) is 1.12, which indicates increasing returns to scale. Additionally, the statements about the percentage changes in output in response to changes in labor and capital inputs are correct interpretations of the elasticities in the Cobb-Douglas production function.

Question 15

In a relationship among total,average and marginal products,where TP is maximized:

Accepted Answer

When Total Product (TP) is maximized, Marginal Product (MP) is equal to zero. This is because at the point of maximum TP, adding one more unit of input does not increase the total output, indicating that MP, which measures the change in total output resulting from a one-unit change in the input, is zero.

Question 16

Fill in the missing data to solve this problem.  
What is the total product for 5 units of input,and what is the marginal product for 6 units of input?

Accepted Answer

To find the missing data, we can use the formula:
Total Product = Average Product * Input
Using this formula, we can fill in the missing data as follows:
- For input of 4, Total Product is missing, so we can use the given Average Product of 70 to calculate it: Total Product = 70 * 4 = 280
- For input of 5, both Total Product and Marginal Product are missing. To find Total Product, we can use the same formula: Total Product = Average Product * Input = ? * 5
But we also know that the Marginal Product for input of 5 is 40. Since Marginal Product is the additional output that is gained from adding one more unit of input, we can assume that the Average Product must have increased by 40 when going from input of 4 to input of 5. Therefore, we can solve for the missing Average Product as follows:
Average Product for input of 4 = Total Product / Input = 280 / 4 = 70
Average Product for input of 5 = Average Product for input of 4 + Marginal Product for input of 5 = 70 + 40 = 110
Then, we can use the formula to find the Total Product for input of 5: Total Product = Average Product * Input = 110 * 5 = 550
- For input of 6, both Marginal Product and one of the other products are missing. To find Marginal Product, we can use the formula:
Marginal Product = Change in Total Product / Change in Input = (Total Product for input of 6 - Total Product for input of 5) / (6 - 5) = (? - 550) / 1 = ?
But we also know that the Total Product for input of 6 is 350 more than for input of 5, since the Total Product for input of 5 was 550. Therefore, the Total Product for input of 6 is:
Total Product for input of 6 = Total Product for input of 5 + 350 = 550 + 350 = 900
Using the Marginal Product formula, we can now solve for the missing Marginal Product:
Marginal Product for input of 6 = (Total Product for input of 6 - Total Product for input of 5) / (6 - 5) = (900 - 550) / 1 = 350
Therefore, the answer is A: 320 and 30 (Total Product for input of 5 and Marginal Product for input of 6).

Question 17

Holding the total output constant,the rate at which one input X may be substituted for another input Y in a production process is:

Accepted Answer

The rate at which one input can be substituted for another in a production process, holding output constant, is represented by all the given options: the slope of the isoquant curve, the marginal rate of technical substitution (MRTS), and the formula provided, which is a mathematical representation of MRTS.

Question 18

Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.

Accepted Answer

Marginal revenue product (MRP) is the change in total revenue resulting from the addition of one unit of a variable input. Therefore, the correct answer is C, as it measures the amount that an additional unit of the variable input adds to total revenue.

Question 19

Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.

Accepted Answer

Marginal factor cost refers to the additional cost to a firm of employing one more unit of input. This additional cost directly adds to the total cost of production.

Question 20

The combinations of inputs costing a constant C dollars is called:

Accepted Answer

An isocost line represents all possible combinations of inputs that cost a constant C dollars.

Quiz 7: Production Economics

In a production process,an excessive amount of the variable input relative to the fixed input is being used to produce the desired output.This statement is true for:

The following is a Cobb-Douglas production function: Q = 1.75K^0.5∙L^0.5.What is correct here?

The marginal product is defined as:

In production and cost analysis,the short run is the period of time in which one (or more)of the resources employed in the production process is fixed or incapable of being varied.

What's true about both the short-run and long-run in terms of production and cost analysis?

The marginal rate of technical substitution may be defined as all of the following except:

If the marginal product of labor is 100 and the price of labor is 10,while the marginal product of capital is 200 and the price of capital is $30,then what should the firm?

Which of the following is never negative?

The law of diminishing marginal returns:

Marginal revenue product is:

The Cobb-Douglas production function is: Q = 1.4L^0.6K^0.5.What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%? [Hint: %∆Q = (E_L * %∆L) + (E_K * %∆K) ]

The isoquants for inputs that are perfect substitutes for one another consist of a series of:

Concerning the maximization of output subject to a cost constraint,which of the following statements (if any) are true?

Suppose you have a Cobb-Douglas function with a capital elasticity of output (α) of 0.28 and a labor elasticity of output (β) of 0.84.What statement is correct?

In a relationship among total,average and marginal products,where TP is maximized:

Fill in the missing data to solve this problem. What is the total product for 5 units of input,and what is the marginal product for 6 units of input?

Holding the total output constant,the rate at which one input X may be substituted for another input Y in a production process is:

Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.

Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.

The combinations of inputs costing a constant C dollars is called:

Quiz 7: Production Economics

In a production process,an excessive amount of the variable input relative to the fixed input is being used to produce the desired output.This statement is true for:

The following is a Cobb-Douglas production function: Q = 1.75K0.5∙L0.5.What is correct here?

The marginal product is defined as:

In production and cost analysis,the short run is the period of time in which one (or more)of the resources employed in the production process is fixed or incapable of being varied.

What's true about both the short-run and long-run in terms of production and cost analysis?

The marginal rate of technical substitution may be defined as all of the following except:

If the marginal product of labor is 100 and the price of labor is 10,while the marginal product of capital is 200 and the price of capital is $30,then what should the firm?

Which of the following is never negative?

The law of diminishing marginal returns:

Marginal revenue product is:

The Cobb-Douglas production function is: Q = 1.4*L0.6*K0.5.What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%? [Hint: %∆Q = (EL * %∆L) + (EK * %∆K) ]

The isoquants for inputs that are perfect substitutes for one another consist of a series of:

Concerning the maximization of output subject to a cost constraint,which of the following statements (if any) are true?

Suppose you have a Cobb-Douglas function with a capital elasticity of output (α) of 0.28 and a labor elasticity of output (β) of 0.84.What statement is correct?

In a relationship among total,average and marginal products,where TP is maximized:

Fill in the missing data to solve this problem. What is the total product for 5 units of input,and what is the marginal product for 6 units of input?

Holding the total output constant,the rate at which one input X may be substituted for another input Y in a production process is:

Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.

Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.

The combinations of inputs costing a constant C dollars is called:

The following is a Cobb-Douglas production function: Q = 1.75K^0.5∙L^0.5.What is correct here?

The Cobb-Douglas production function is: Q = 1.4L^0.6K^0.5.What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%? [Hint: %∆Q = (E_L * %∆L) + (E_K * %∆K) ]