Question 1

Table 7.4 
-Refer to Table 7.4.The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan, a commercial fisherman.
a.Complete the Marginal Product column in Table 7-4.
b.Characterise the production function, i.e.does the production function display increasing marginal returns, diminishing marginal returns, etc.
c.Using the data above, graph Juan's marginal product curve.Be sure to label the horizontal and vertical axes.Is your graph consistent with your answer to part (b)? Explain.
d.Juan uses the following inputs for fishing - a small wooden boat (B), a fishing pole (P)and of course, his labour (L).Treating the boat and the fishing pole as fixed inputs and using the data above, graph Juan's Total Product of labour curve.Be sure to label the horizontal and vertical axes.
e.(Extra Credit)The opportunity cost of Juan's time is $8 per hour.If Juan receives $2 per metric for his fish, what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer.Hint: Recall marginal benefit and marginal cost analysis.
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Accepted Answer

The answer of Table 7.4 
-Refer to Table 7.4.The table...

Question 2

What is true, in the short run, if marginal product is at its maximum?

Accepted Answer

If marginal product is at its maximum, it means that each additional unit of input is producing the greatest amount of output possible. This implies that marginal cost is at its minimum, because we are getting the most output per unit of input, so the cost of each additional unit of input is lower.

Question 3

State the law of diminishing marginal returns.
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Accepted Answer

The answer of State the law of diminishing marginal returns.
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Question 4

If a firm experiences diminishing returns, its marginal product must be negative.

Accepted Answer

Diminishing returns means that the marginal product of an additional unit of input decreases as more units of input are added. This does not necessarily mean that the marginal product becomes negative, only that it is decreasing at a decreasing rate.

Question 5

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

Accepted Answer

This statement is true. The marginal product of labor is the additional amount of output that a firm can produce by hiring one more worker, while holding all other inputs constant. It is an important concept in the field of microeconomics, as it helps firms to determine the optimal level of employment and production.

Question 6

What is the marginal product of labour and what is the average product of labour.
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Accepted Answer

The answer of What is the marginal product of labour...

Question 7

If fixed costs do not change, then marginal cost

Accepted Answer

Marginal cost is defined as the change in total cost that arises when the quantity produced is incremented by one unit. Since fixed costs do not change, the change in total cost is solely due to the change in variable cost. Therefore, marginal cost equals the change in variable cost divided by the change in output.

Question 8

What is marginal cost?

Accepted Answer

Marginal cost refers to the additional cost incurred when producing one more unit of output. It is the change in total cost that results from producing one more unit of output, and is calculated as the change in total cost divided by the change in quantity.

Question 9

If, after hiring the 6th worker, a firm's output falls, then the marginal product of the 6th worker is negative.

Accepted Answer

The law of diminishing marginal returns states that as more units of a variable input are added to a fixed input, the marginal product of that variable input will eventually decrease, assuming all other inputs are held constant. If the addition of the 6th worker causes a decrease in output, then the marginal product of the 6th worker must be negative.

Question 10

Damian owns a tattoo parlour and has hired three tattoo artists to work for him.The marginal product of labour is 8 for the first artist, 12 for the second artist, and 7 for the third artist.What is Damian's average product of labour for these three tattoo artists?
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Accepted Answer

The answer of Damian owns a tattoo parlour and has...

Question 11

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Accepted Answer

If the marginal cost of the 15th unit is less than the average cost of the 14th unit, producing the 15th unit will lower the average cost. In this case, since the marginal cost of the 15th unit is $29.50, which is less than the average cost of $30.23 for the 14th unit, the average cost will fall if the 15th unit is produced.

Question 12

Which of the following costs will not change as output changes?

Accepted Answer

Total fixed cost remains constant regardless of the level of output as it includes the overhead expenses like rent, salaries of permanent employees, etc.

Question 13

Fill in the missing values in the following table.Draw one graph showing how total output increases with the quantity of workers hired, and another graph showing the marginal product of labour and the average product of labour.

Accepted Answer

The answer of Fill in the missing values in the...

Question 14

Average fixed costs of production

Accepted Answer

Average fixed costs decrease as output increases because the total fixed costs are spread over a larger number of units, leading to a lower cost per unit.

Question 15

Marginal cost is equal to the

Accepted Answer

Marginal cost is the additional cost incurred for producing one more unit of output. Therefore, it is calculated as the change in total cost divided by the change in output.

Question 16

If marginal product is equal to average product, then total product is at a maximum.

Accepted Answer

The statement is not true. When marginal product is equal to average product, total product is at its maximum rate of change (neither increasing nor decreasing). However, total product may continue to increase or may level off at this point, depending on the shape of the production function. Therefore, it cannot be said that total product is at a maximum.

Question 17

Which of the following is true if production displays increasing marginal returns?

Accepted Answer

Increasing marginal returns means that each new worker hired is adding more to output than the previous hires. This results in a higher total product, but does not necessarily mean that it rises by a constant amount throughout or that new capital is required. It is also not necessarily true that total product reaches a maximum sooner than with decreasing returns.

Question 18

If average product is decreasing, then marginal product must be negative.

Accepted Answer

This statement is false. The average product can decrease when the marginal product is positive but decreasing. The marginal product only becomes negative when it reaches zero and then starts decreasing.

Question 19

When a firm produces 50 000 units of output, its total cost equals $6.5 million.When it increases its production to 70 000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Accepted Answer

The answer of When a firm produces 50 000 units...

Question 20

A downward-sloping marginal product of labour curve demonstrates the law of diminishing marginal returns.

Accepted Answer

The law of diminishing marginal returns states that as more units of a variable input (such as labour) are added to a fixed input (such as capital), the marginal product of that variable input will eventually decline. This is typically represented by a downward-sloping marginal product of labour curve. Therefore, the statement "a downward-sloping marginal product of labour curve demonstrates the law of diminishing marginal returns" is true.

Quiz 7: Technology Production and Costs