Question 1

Suppose you run a pizza shop and currently have two employees. If you hire a third employee, your output of pizzas per day rises from 55 to 65. If you hire a fourth employee, output rises to 80 per day. A fifth and sixth employee would cause output to rise to 90 and 95 per day, respectively. Pick the correct statement:
A) Diminishing returns set in with the hiring of the fourth worker.
B) Diminishing returns set in with the hiring of the fifth worker.
C) Diminishing returns set in with the hiring of the sixth worker.
D) Diminishing returns set have not yet set in because output is still increases.

Accepted Answer

Diminishing returns set in with the hiring of the fifth worker because the increase in output from the fourth to fifth worker is only 10 pizzas per day, compared to an increase of 15 pizzas per day from the third to fourth worker. This suggests that the marginal productivity of labor is decreasing as more workers are added beyond four.

Question 2

Fill in the blanks in the table below and answer the next   questions:

-In  the above table, the average product of labor when 4 units of labor are employed is
A) 22.
B) 20.
C) 19.
D) 16.

Accepted Answer

To find the average product of labor when 4 units of labor are employed, we need to calculate the total product of labor when 4 units are employed and divide it by 4. 
Total product of labor when 4 units are employed = 76
Average product of labor when 4 units are employed = 76/4 = 19. 
Therefore, the best choice is C) 19.

Question 3

Refer to the following:
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of Labor }
\end{array} & \begin{array} { c } 
\text { Totel } \
\text { Praduet }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Narginal } \
\text { Produet }
\end{array} \
\hline 1 & - & - & 100 \
2 & - & 125 & - \
3 & 300 & - & - \
4 & - & - & 20\
5&290&-&-
\end{array}$$
-In the table above, what is the maximum amount of output that can be produced with two workers?
A) 50
B) 125
C) 150
D) 250
E) 320

Accepted Answer

D

Question 4

Fill in the blanks in the table below and answer the next   questions:

-In the above table, diminishing returns begin with the
A) first unit of labor.
B) third unit of labor.
C) fourth unit of labor.
D) sixth unit of labor.

Accepted Answer

The answer of Fill in the blanks in the table...

Question 5

A production function measures the relation between
A) input prices and output prices.
B) the quantity of inputs and the quantity of output.
C) input prices and the quantity of output.
D) the quantity of inputs and input prices.
E) none of the above

Accepted Answer

A production function is a mathematical representation of the relationship between inputs and outputs in a production process. It shows how much output can be produced from different combinations of inputs. Therefore, it measures the relation between the quantity of inputs and the quantity of output. Input prices may be a factor in determining the most efficient combination of inputs to achieve a certain level of output, but the production function itself does not measure this specific relationship between input prices and output prices.

Question 6

Fill in the blanks in the table below and answer the next   questions:

-In the above table, marginal product is negative when _____ units of labor are employed.
A) 5 units of labor are employed.
B) 6 units of labor are employed.
C) 7 units of labor are employed.
D) both b and C

Accepted Answer

Marginal product is negative when the total product starts to decrease with the addition of an additional unit of labor. Looking at the table, the total product starts to decline at 6 units of labor and continues to decline with the addition of the 7th unit of labor. Therefore, both options B and C are correct.

Question 7

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} 
&\text { Units of Capital }\
&& 1 & 2 & 3 \
\hline  &1 & 80 & 100 & 120 \
\text {Units }&2 & 180 & 220 & 260 \
\text {of }&3 & 270 & 330 & 390 \
\text {Labor }&4 & 340 & 420 & 500 \
&5 & 390 & 490 & 590 \
&6 & 410 & 530 & 650
\end{array}$
-If labor is fixed at three units, how much does the third unit of capital add to total output?
A) 60
B) 80
C) 110
D) 130
E) none of the above

Accepted Answer

The answer of Refer to the following:
Amount of total output...

Question 8

If average product is increasing, then marginal product
A) must be greater than average product.
B) must be less than average product.
C) must be increasing.
D) cannot be decreasing.
E) both a and c

Accepted Answer

If average product is increasing, then the marginal product must be higher than the average product. This is because the average product is calculated by dividing the total output by the units of input, and if the average product is increasing, it means that the total output is increasing at a greater rate than the units of input. This can only happen if the marginal product, which measures the additional output generated by each additional unit of input, is greater than the current average product.

Question 9

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} 
&\text { Units of Capital }\
&& 1 & 2 & 3 \
\hline  &1 & 80 & 100 & 120 \
\text {Units }&2 & 180 & 220 & 260 \
\text {of }&3 & 270 & 330 & 390 \
\text {Labor }&4 & 340 & 420 & 500 \
&5 & 390 & 490 & 590 \
&6 & 410 & 530 & 650
\end{array}$
-If labor is fixed at 5 units, how much does the second unit of capital add to total output?
A) 490
B) 390
C) 50
D) 100
E) none of the above

Accepted Answer

The second unit of capital increases output from 390 to 490, adding 100 units of output.

Question 10

Refer to the following:
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of Labor }
\end{array} & \begin{array} { c } 
\text { Totel } \
\text { Praduet }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Narginal } \
\text { Produet }
\end{array} \
\hline 1 & - & - & 100 \
2 & - & 125 & - \
3 & 300 & - & - \
4 & - & - & 20\
5&290&-&-
\end{array}$$
-In the table above, diminishing returns
A) begin with the first unit of labor.
B) begin with the third unit of labor.
C) begin with the fourth unit of labor.
D) begin with the fifth unit of labor.
E) do not occur because output is positive for all levels of labor usage.

Accepted Answer

The answer of Refer to the following:
 \[\begin{array} { c...

Question 11

Refer to the following:
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of Labor }
\end{array} & \begin{array} { c } 
\text { Totel } \
\text { Praduet }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Narginal } \
\text { Produet }
\end{array} \
\hline 1 & - & - & 100 \
2 & - & 125 & - \
3 & 300 & - & - \
4 & - & - & 20\
5&290&-&-
\end{array}$$
-In the table above, how much does the third unit of labor ADD to total output?
A) 100
B) 125
C) 150
D) 300
E) none of the above

Accepted Answer

The answer of Refer to the following:
 \[\begin{array} { c...

Question 12

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} 
&\text { Units of Capital }\
&& 1 & 2 & 3 \
\hline  &1 & 80 & 100 & 120 \
\text {Units }&2 & 180 & 220 & 260 \
\text {of }&3 & 270 & 330 & 390 \
\text {Labor }&4 & 340 & 420 & 500 \
&5 & 390 & 490 & 590 \
&6 & 410 & 530 & 650
\end{array}$
-If capital is fixed at two units, what is the marginal product of the fourth unit of labor?
A) 60
B) 80
C) 100
D) 420
E) none of the above

Accepted Answer

The answer of Refer to the following:
Amount of total output...

Question 13

Refer to the following:
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of Labor }
\end{array} & \begin{array} { c } 
\text { Totel } \
\text { Praduet }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Narginal } \
\text { Produet }
\end{array} \
\hline 1 & - & - & 100 \
2 & - & 125 & - \
3 & 300 & - & - \
4 & - & - & 20\
5&290&-&-
\end{array}$$
-the table above, what is the marginal product of the fifth unit of labor?
A) 20
B) 50
C) 80
D)-10
E) -30

Accepted Answer

The answer of Refer to the following:
 \[\begin{array} { c...

Question 14

Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns
A) set in when the fourth worker is hired.
B) set in when the fifth worker is hired.
C) set in when the sixth worker is hired.
D) have not yet set in because output is still increasing.

Accepted Answer

The answer of Suppose that you run a house-painting company...

Question 15

Refer to the following:
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of Labor }
\end{array} & \begin{array} { c } 
\text { Totel } \
\text { Praduet }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Narginal } \
\text { Produet }
\end{array} \
\hline 1 & - & - & 100 \
2 & - & 125 & - \
3 & 300 & - & - \
4 & - & - & 20\
5&290&-&-
\end{array}$$
-In the table above, what is the average product of four units of labor?
A) 20
B) 60
C) 80
D) 100
E) 350

Accepted Answer

The total product for 4 units of labor can be calculated using the marginal product: 300 (from 3 units) + 20 (marginal product of 4th unit) = 320. The average product is then 320 / 4 = 80.

Question 16

A short-run production function assumes that
A) the level of output is fixed.
B) at least one input is a fixed input.
C) all inputs are fixed inputs.
D) both a and b
E) both b and c

Accepted Answer

The short-run production function assumes that at least one input is a fixed input. This means that there is a limit to how much output can be produced in the short run, as at least one input cannot be changed.

Question 17

Refer to the following:
Amount of total output produced from various combinations of labor and capital.

$\begin{array}{cccc} 
&\text { Units of Capital }\
&& 1 & 2 & 3 \
\hline  &1 & 80 & 100 & 120 \
\text {Units }&2 & 180 & 220 & 260 \
\text {of }&3 & 270 & 330 & 390 \
\text {Labor }&4 & 340 & 420 & 500 \
&5 & 390 & 490 & 590 \
&6 & 410 & 530 & 650
\end{array}$
-If capital is fixed at one unit, diminishing returns begin with the
A) first unit of labor.
B) second unit of labor.
C) third unit of labor.
D) fourth unit of labor.
E) none of the above

Accepted Answer

Diminishing returns begin when each additional unit of labor adds less to the total output than the previous unit. From 1 to 2 units of labor, output increases by 100 (180-80), from 2 to 3 units by 90 (270-180), indicating diminishing returns start with the third unit of labor.

Question 18

Which of the following statements is FALSE?
A) A firm plans in the long run and operates in the short run.
B) In the short run, a firm can change some but not all of its inputs.
C) In the long run all inputs are variable.
D) In the short run all inputs are fixed.

Accepted Answer

In the short run, some inputs can be variable while others are fixed, but not all inputs are fixed.

Question 19

For a short-run production function in which output is determined by the number of workers utilized (capital stock held constant), which of the following is FALSE?
A) In general, when there are few workers the marginal product of labor will be increasing.
B) When the marginal product of labor is negative, total product is falling.
C) To determine the marginal product of labor, the capital stock must be held constant.
D) When diminishing returns set in, adding one more worker decreases output.
E) none of the above

Accepted Answer

In the short run, when diminishing returns set in, adding one more worker still increases output, but at a decreasing rate, not decreasing output.

Question 20

Fill in the blanks in the table below and answer the next   questions:

-In the above table, the marginal product of the fifth unit of labor is
A) 16.
B) 10.
C) 4.
D) -2.

Accepted Answer

The marginal product of labor is the additional output produced by adding one more unit of labor. If the table shows that the total output increases by 4 units when the fifth unit of labor is added, then the marginal product of the fifth unit of labor is 4.

Quiz 8: Production and Cost in the Short Run

Fill in the blanks in the table below and answer the next questions: -In the above table, the average product of labor when 4 units of labor are employed is

Fill in the blanks in the table below and answer the next questions: -In the above table, diminishing returns begin with the

A production function measures the relation between

Fill in the blanks in the table below and answer the next questions: -In the above table, marginal product is negative when _____ units of labor are employed.

If average product is increasing, then marginal product

A short-run production function assumes that

Which of the following statements is FALSE?

For a short-run production function in which output is determined by the number of workers utilized (capital stock held constant) , which of the following is FALSE?

Fill in the blanks in the table below and answer the next questions: -In the above table, the marginal product of the fifth unit of labor is