Question 1

The no free lunch assumption states that you cannot get any output from a production process without inputs.

Accepted Answer

The statement accurately describes the no free lunch assumption, which is a fundamental concept in economics and production theory. It asserts that in order to obtain any output, you must first provide inputs, whether they are labor, material, energy, or other resources. Therefore, there is no such thing as a free lunch in production, as everything comes with a cost.

Question 2

The rate at which one input can be substituted for another while keeping the output produced constant is the marginal rate of
A) technical substitution
B) substitution
C) transformation

Accepted Answer

The concept of marginal rate of technical substitution (MRTS) measures the rate at which one input can be substituted for another input while keeping the output constant. Therefore, option A is the best choice. Option B (substitution) is too general, and option C (transformation) is not related to the concept of MRTS.

Question 3

The short run is the time period during which at least one factor of production is fixed.

Accepted Answer

In the short run, at least one factor of production, such as capital or land, cannot be easily adjusted. This distinguishes the short run from the long run, during which all factors of production can be adjusted.

Question 4

The assumption that states that, if an input combination y is a feasible input combination, then so is λy where 0 ≤λ≤ 1 is known as theλ
A) additivity assumption
B) divisibility assumption
C) convexity assumption

Accepted Answer

The answer of The assumption that states that, if an...

Question 5

The marginal rate of technical substitution measures the ratio between the resulting change in the output level and the proportionate change in the levels of all the inputs.

Accepted Answer

The marginal rate of technical substitution measures the rate at which one input can be reduced for an increase in another input while keeping the output level constant, not the change in output level relative to changes in inputs.

Question 6

The production function that allows the producer to vary the levels of some, but not all inputs in an effort to produce a given quantity is called the short-run production function.

Accepted Answer

The definition accurately describes the short-run production function.

Question 7

The assumption that states that, if there is a production activity y that produces a certain amount of output z using capital and labor in particular amounts and another activity w that produces the same quantity using different amounts of these inputs, then we can always produce at least z by mixing these activities and using y a fraction of the time and w a fraction of the time is known as the
A) additivity assumption
B) divisibility assumption
C) convexity assumption

Accepted Answer

The given assumption is known as the convexity assumption, as it states that the production possibility set is convex. This means that any combination of the two production activities lying between y and w can also be produced by mixing y and w in some proportion. The additivity assumption is related to the composition of output, where the total output is simply the sum of outputs produced by different activities. The divisibility assumption assumes that inputs can be used in arbitrarily small quantities. Therefore, option C is the best choice as it accurately describes the given assumption.

Question 8

Decreasing returns to scale is a feature of a technology that is such that, when all inputs are increased by a fixed multiple λ, output increases by less than that multiple.

Accepted Answer

This is the definition of decreasing returns to scale, as opposed to constant or increasing returns to scale where output increases at the same or greater rate than input.

Question 9

A production function is a function the describes the __________ amouint of _________ a producer can produce given a certain level of _________.
A) minimum, output, inputs
B) maximum, input, outputs
C) maximum, output, inputs

Accepted Answer

A production function describes the maximum amount of output a producer can produce given a certain level of inputs. Option A is incorrect because it implies that there is a minimum level of output, which is not necessarily the case. Option B is incorrect because it flips the roles of inputs and outputs in the definition of a production function.

Question 10

A factor of production whose level cannot be adjusted in the time period under investigation is a fixed factor of production.

Accepted Answer

A fixed factor of production, such as a factory or a piece of land, cannot be easily adjusted in the short term. It is considered to be a fixed input in the production process.

Question 11

The assumption that states that, if we can produce a cetain output with a given combination of inputs, then with those inputs we can always produce strictly less is called the subtractivity assumption.

Accepted Answer

The subtractivity assumption states that if we can produce a certain output with a given combination of inputs, then with those inputs we can never produce more output.

Question 12

A return that is just sufficient to recover an entrepreneur's opportunity cost is known as
A) opportunity profit
B) extra-normal profit
C) normal profit

Accepted Answer

Normal profit is the minimum return required for an entrepreneur to stay in business and cover their opportunity cost, including the salary they could have earned in their next best alternative. It is also known as a break-even point where the revenue is equal to the total costs, including both explicit and implicit costs. Therefore, the correct answer is C. Option A is incorrect as opportunity profit suggests earning more than the opportunity cost, and option B is incorrect as extra-normal profits refer to profits in excess of normal profits.

Question 13

Any return above the normal profit to an entrepreneur is known as
A) opportunity cost
B) extra-normal profit
C) free lunch

Accepted Answer

Any return above the normal profit is called extra-normal profit. This additional profit is earned by entrepreneurs who take on greater risks, innovate, and create a unique business model. Opportunity cost refers to the cost of choosing one option over another, while "free lunch" is a term used to describe a reward or benefit without any work or cost involved. Therefore, option B is the best choice.

Question 14

An production indifference curve is the set of bundles that most efficiently produce the same output given a production function.

Accepted Answer

A production indifference curve does not exist; the correct term is an isoquant, which represents combinations of inputs that produce the same level of output in a production process.

Question 15

The assumption that states that, if we can produce an output of x using one combination of inputs and another level of output of y using another combination of these inputs, then we can feasibly produce the output x + y is known as the
A) additivity assumption
B) divisibility assumption
C) convexity assumption

Accepted Answer

The additivity assumption states that the total output is the sum of the individual outputs produced by each combination of inputs. This assumption is commonly used in economics and production theory. The other options, divisibility and convexity assumptions, are not relevant in this context.

Question 16

The assumption that states that you cannot run a production process in reverse is called the
A) no free lunch assumption
B) nonreversibility assumption
C) divisibility assumption

Accepted Answer

The nonreversibility assumption states that a production process cannot be run in reverse. This means that once a good or service has been produced, it cannot be "unproduced" or turned back into the inputs that were used to create it. This assumption is important in understanding the irreversibility of certain decisions and the cost of production. Choice A (no free lunch assumption) and Choice C (divisibility assumption) are not relevant to the concept of reversibility in production processes.

Question 17

The marginal product curve represents how much output we get at different levels of labor inputs holding capital fixed at a given level.

Accepted Answer

The answer of The marginal product curve represents how much...

Question 18

Technology is
A) the set of constraints on production defining how one can combine or convert inputs into outputs
B) a return that is just sufficient to recover an entrepreneur's opportunity cost
C) a concept that has no effect on production

Accepted Answer

Technology refers to the methods, techniques, and tools used to transform inputs such as labor, capital, and raw materials into outputs such as goods and services. It determines the combinations and transformations of inputs that are possible and defines the production process. Technology affects the efficiency and productivity of the production process, which in turn affects the economic outcomes. Therefore, option A is the most appropriate choice. Option B is incorrect because it refers to the concept of opportunity cost, which is unrelated to the definition of technology. Option C is incorrect because technology has a significant impact on production and the economy.

Question 19

Opportunity cost is measured by the amount of money spent to perform any activity.

Accepted Answer

Opportunity cost is not measured by the amount of money spent, but rather by the value of the next best alternative that was foregone. It is the cost of the next best choice that was not made.

Question 20

The amount by which output would increase if we added one more unit of capital to production, holding all other inputs fixed is called the
A) average product of capital
B) marginal product of labor
C) marginal product of capital

Accepted Answer

The definition given in the question matches with the concept of marginal product of capital, which measures the change in output caused by adding one more unit of capital while all other inputs, including labor, remain constant. Choice A, average product of capital, is the average amount of output produced per unit of capital, whereas choice B, marginal product of labor, measures the change in output caused by adding one more unit of labor while all other inputs, including capital, remain constant.

Quiz 8: The Discovery of Production and Its Technology

The no free lunch assumption states that you cannot get any output from a production process without inputs.

The rate at which one input can be substituted for another while keeping the output produced constant is the marginal rate of

The short run is the time period during which at least one factor of production is fixed.

The assumption that states that, if an input combination y is a feasible input combination, then so is λy where 0 ≤λ≤ 1 is known as theλ

The marginal rate of technical substitution measures the ratio between the resulting change in the output level and the proportionate change in the levels of all the inputs.

The production function that allows the producer to vary the levels of some, but not all inputs in an effort to produce a given quantity is called the short-run production function.

Decreasing returns to scale is a feature of a technology that is such that, when all inputs are increased by a fixed multiple λ, output increases by less than that multiple.

A production function is a function the describes the ______ amouint of _ a producer can produce given a certain level of _____.

A factor of production whose level cannot be adjusted in the time period under investigation is a fixed factor of production.

The assumption that states that, if we can produce a cetain output with a given combination of inputs, then with those inputs we can always produce strictly less is called the subtractivity assumption.

A return that is just sufficient to recover an entrepreneur's opportunity cost is known as

Any return above the normal profit to an entrepreneur is known as

An production indifference curve is the set of bundles that most efficiently produce the same output given a production function.

The assumption that states that, if we can produce an output of x using one combination of inputs and another level of output of y using another combination of these inputs, then we can feasibly produce the output x + y is known as the

The assumption that states that you cannot run a production process in reverse is called the

The marginal product curve represents how much output we get at different levels of labor inputs holding capital fixed at a given level.

Technology is

Opportunity cost is measured by the amount of money spent to perform any activity.

The amount by which output would increase if we added one more unit of capital to production, holding all other inputs fixed is called the