Question 1

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the slope of the production function at a specific point equals the marginal product of labor whereas the average slope of the production function equals the average product of labor.

Accepted Answer

The answer of For a simple graph of a production...

Question 2

Let a firm's production function be $Q = 100 ( a L + b K )$. The production function then becomes $Q = 500 ( a L + b K )$. Which of the following statements is true?
A)Neutral technological progress has occurred.
B)Labor-saving technological progress has occurred.
C)Capital-saving technological progress has occurred.
D)Economies of scale have increased.

Accepted Answer

The increase in output from $100 ( a L + b K )$ to $500 ( a L + b K )$ without changing the proportion of labor (L) and capital (K) indicates neutral technological progress, as the technology improvement affects the production of both inputs equally.

Question 3

Technically inefficient points only exist with older firms.

Accepted Answer

Technically inefficient points can exist with both older and newer firms. It depends on their budget constraints and production technology. Technically inefficient points can exist with any firm, regardless of age. It refers to a situation where a firm is not producing at its maximum level of efficiency, which can be due to various reasons such as outdated technology or poor management practices.

Question 4

Identify the true statement.
A)Decreasing returns to scale and diminishing marginal returns are just two different ways of saying the same thing.
B)Returns to scale pertains to the impact on output of increasing all inputs simultaneously; diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant.
C)Returns to scale pertains to the impact on output of changing a single input while holding all other inputs constant; diminishing marginal returns pertains to the impact on output of increasing all inputs simultaneously.
D)Returns to scale can be identified by calculating the slope of an isoquant.

Accepted Answer

Decreasing returns to scale refers to the proportional decrease in output as all inputs are increased proportionally. Diminishing marginal returns, on the other hand, refers to the decrease in additional output from increasing one input unit while holding all other inputs constant. Returns to scale pertains to the impact on output of increasing all inputs simultaneously, while diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant. Option D is incorrect as returns to scale can be identified by examining the shape of isoquants, not their slope. Returns to scale refers to the impact of increasing all inputs simultaneously, while diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant. These are two distinct concepts. Option A is incorrect because decreasing returns to scale and diminishing marginal returns are not the same thing. Option C is incorrect because it defines the two concepts in reverse. Option D is incorrect because returns to scale cannot be identified by calculating the slope of an isoquant; rather, they are determined by looking at the percentage change in output resulting from a proportionate change in all inputs.

Question 5

When the marginal product curve lies above the average product curve, then average product is rising.

Accepted Answer

When the marginal product curve is above the average product curve, it means that each additional unit of input is producing more output than the average. This pulls the average up, causing it to rise. When the marginal product curve lies above the average product curve, it means that each additional unit of input is providing a higher output than the average. This leads to an increase in the overall output, causing the average product to rise.

Question 6

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:
A)increasing returns to scale.
B)constant returns to scale.
C)decreasing returns to scale.
D)undefined returns to scale.

Accepted Answer

The production function exhibits decreasing returns to scale when output increases at a proportionally smaller rate than input. When the inputs are tripled, the output only doubles, indicating a less than proportional increase in output. Thus, the production function exhibits decreasing returns to scale for this range of output.

Question 7

Technically inefficient points are points on the production function.

Accepted Answer

Technically inefficient points are points below the production function, indicating that more output could be produced with the given inputs. Points on the production function represent technically efficient production.

Question 8

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

Accepted Answer

The production function represents the maximum output that can be produced using a given combination of inputs without wasting any resources. Therefore, only technically efficient input combinations are found on the production function. The production function represents the maximum output that can be produced with a given combination of inputs while being technically efficient. Therefore, only technically efficient input combinations can be found on the production function.

Question 9

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is equal to the slope of the ray from the origin to the apex of the production function for all values of L.

Accepted Answer

The average product of labor is actually equal to the height of the production function at any given level of L. The slope of the ray from the origin to the apex of the production function only represents the marginal product of labor at that specific level of L. The average product of labor is the total output Q divided by the amount of labor L used to produce it, so it is calculated as Q/L. The slope of the ray from the origin to the apex of the production function represents the marginal product of labor, which is the additional output produced by an additional unit of labor. The average product of labor may be equal to or different from the marginal product of labor, depending on the shape of the production function.

Question 10

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is never equal to the slope of the ray from the origin to the apex of the production function.

Accepted Answer

The average product of labor is equal to the slope of the ray from the origin to the apex of the production function at the point where the ray intersects an isoquant. This is because the slope of the ray represents the marginal product of labor, which is equal to the average product of labor at that point. The average product of labor is equal to the slope of the ray from the origin to the apex of the production function.

Question 11

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies:
A)the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will increase.
B)the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will decrease.
C)the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will increase.
D)the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will decrease.

Accepted Answer

Capital-saving technological progress means that less capital is needed to produce the same level of output, so isoquants shift inward, indicating efficiency. Along any ray from the origin, output increases with less capital.

Question 12

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the slope of the production function at a specific point equals the marginal product of labor whereas the slope between the origin and a specific point on the production function equals the average product of labor.

Accepted Answer

This statement is true. The slope of a production function at a specific point represents the change in output (Q) resulting from a one-unit increase in labor input (L), which is exactly the definition of marginal product of labor. The slope between the origin and a specific point on the production function represents the average product of labor because it is calculated as the ratio of output (Q) to labor input (L) over a certain range of values. The statement is true. The slope of the production function at a specific point is equal to the marginal product of labor (MPL) because it measures the additional output generated by adding one more unit of labor. The slope between the origin and a specific point on the production function is equal to the average product of labor (APL) because it measures the output per unit of labor at that level of production.

Question 13

Given a production function $Q = 3 L K$ ,we can say that:
A)this production function is not Cobb-Douglas.
B)this production function is Cobb-Douglas and exhibits decreasing returns to scale.
C)this Cobb-Douglas production function does not exhibit a constant elasticity of substitution.
D)this production function is Cobb-Douglas and exhibits increasing returns to scale.

Accepted Answer

The answer of Given a production function \(Q = 3...

Question 14

Consider the production function $Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ where $c$ is some constant different than zero. This production function exhibits:
A)decreasing returns to scale.
B)constant returns to scale.
C)increasing returns to scale.
D)either decreasing or constant returns to scale, but more information is needed to determine which one.

Accepted Answer

The answer of Consider the production function \(Q = \left[...

Question 15

When the marginal product of labor is falling, the average product of labor is falling.

Accepted Answer

When the marginal product of labor is falling, it does not necessarily mean the average product of labor is falling; it only indicates that each additional unit of labor is contributing less to output than the previous one. The average product of labor could still be rising if the marginal product is above the average product.

Question 16

Technically inefficient points are points that are never observed in practice.

Accepted Answer

Technically inefficient points are observed in practice, but they are not desirable because they represent a combination of inputs that result in a lower output level compared to other feasible points.

Question 17

Technically inefficient points are points contained in neither the production set nor the production function.

Accepted Answer

Technically inefficient points are points that lie outside the production function, meaning they cannot be produced with the given inputs. Points that are contained in the production set but not on the production function are inefficient points, meaning they can be produced with fewer inputs or more output could be produced with the same inputs.

Question 18

The production function identifies the technically feasible combinations of inputs.

Accepted Answer

The answer of The production function identifies the technically feasible...

Question 19

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing:
A)neutral technological progress.
B)labor-saving technological progress.
C)capital-saving technological progress.
D)both labor-saving and capital-saving technological progress.

Accepted Answer

Labor-saving technological progress is indicated by a flatter slope of the isoquant as we move inward, meaning less labor is needed in combination with capital to produce the same level of output.

Question 20

Technically inefficient points are points in the production set but not on the production function.

Accepted Answer

Technically inefficient points refer to points in the production set that are not feasible to produce given the available resources and technology. These points are not on the production function, which represents the maximum output that can be produced using the given inputs. Therefore, the statement is true.

Quiz 6: Inputs and Production Functions

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the slope of the production function at a specific point equals the marginal product of labor whereas the average slope of the production function equals the average product of labor.

Let a firm's production function be $Q = 100 ( a L + b K )$ . The production function then becomes $Q = 500 ( a L + b K )$ . Which of the following statements is true?

Technically inefficient points only exist with older firms.

Identify the true statement.

When the marginal product curve lies above the average product curve, then average product is rising.

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:

Technically inefficient points are points on the production function.

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is equal to the slope of the ray from the origin to the apex of the production function for all values of L.

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is never equal to the slope of the ray from the origin to the apex of the production function.

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies:

Given a production function $Q = 3 L K$ ,we can say that:

Consider the production function $Q = \left[ c + a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ where $c$ is some constant different than zero. This production function exhibits:

When the marginal product of labor is falling, the average product of labor is falling.

Technically inefficient points are points that are never observed in practice.

Technically inefficient points are points contained in neither the production set nor the production function.

The production function identifies the technically feasible combinations of inputs.

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter) , we are observing:

Technically inefficient points are points in the production set but not on the production function.

Quiz 6: Inputs and Production Functions

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the slope of the production function at a specific point equals the marginal product of labor whereas the average slope of the production function equals the average product of labor.

Let a firm's production function be Q=100(aL+bK) Q = 100 ( a L + b K ) Q=100(aL+bK) . The production function then becomes Q=500(aL+bK) Q = 500 ( a L + b K ) Q=500(aL+bK) . Which of the following statements is true?

Technically inefficient points only exist with older firms.

Identify the true statement.

When the marginal product curve lies above the average product curve, then average product is rising.

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:

Technically inefficient points are points on the production function.

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is equal to the slope of the ray from the origin to the apex of the production function for all values of L.

For a simple graph of a production function with Q on the y-axis and L on the x-axis, the average product of labor is never equal to the slope of the ray from the origin to the apex of the production function.

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies:

Given a production function Q=3LKQ = 3 L KQ=3LK ,we can say that:

When the marginal product of labor is falling, the average product of labor is falling.

Technically inefficient points are points that are never observed in practice.

Technically inefficient points are points contained in neither the production set nor the production function.

The production function identifies the technically feasible combinations of inputs.

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter) , we are observing:

Technically inefficient points are points in the production set but not on the production function.

Let a firm's production function be $Q = 100 ( a L + b K )$ . The production function then becomes $Q = 500 ( a L + b K )$ . Which of the following statements is true?

Given a production function $Q = 3 L K$ ,we can say that: