Question 1

In a two-input model you can tell that a non-optimal short-run production decision is being made if&#10;A)all decisions in the short run are nonoptimal&#10;B)the rate of technical substitution is equal to the ratio of the input prices&#10;C)the rate of technical substitution is not equal to the ratio of the input prices

Accepted Answer

In a two-input model, the optimal short-run production decision is when the rate of technical substitution (RTS) equals the ratio of input prices (MRTS = w1/w2). If the RTS is not equal to the input prices ratio, then the current production decision is non-optimal. This is because the firm could increase its output by adjusting the allocation of inputs. Therefore, choice C is the best answer.

Question 2

Suppose Q = K^aL^b,if a + b > 1 the isoquants will be A)upward sloping. B)progressively closer together at higher quantities. C)progressively further apart at higher quantities. D)equally spaced.

Accepted Answer

CThe given equation Q = K^aL^b represents a production function with increasing returns to scale if a + b > 1. This implies that as the quantity of output increases, the production becomes more efficient. Therefore, the isoquants, which represent combinations of inputs that yield the same output, will be progressively closer together at higher quantities (B) because less input is needed for each additional unit of output. Additionally, this efficiency can also be interpreted as the isoquants being progressively further apart at lower quantities of output (C), reflecting the increased input requirement for initial units of output.

Question 3

When isoquants get progressively closer together there is&#10;A)increasing returns to scale&#10;B)decreasing returns to scale&#10;C)constant returns to scale

Accepted Answer

increasing returns to scale

Question 4

If Q = K^1/2L^1/2 the MP_K is A)constant B)diminishing C)increasing

Accepted Answer

By simplifying the equation, we get: Q = K(B1/B0)(S1/U1)(P1/2)(S1/S1)(P0/L)(S1/U1)(P1/2)(S1/S1)(P0) Q = K(B1/B0)(P1/2)(P0/L) Hence, MP_K = (P1/B1)(P0/B0) Since B1 > B0, the fraction (P1/B1)(P0/B0) diminishes as the value of Q increases, therefore the correct answer is B.

Question 5

With a quadratic production with fixed capital Q = A + BL + CL² and the shape shown above,A is A)positive and greater than B. B)positive and less than B. C)zero. D)negative.

Accepted Answer

Since the shape of the equation is a quadratic function, it is of the form ax^2 + bx + c. In this case, the coefficient of the linear term (B) and the coefficient of the interaction term (CL²) are both non-zero, so we can see that the equation has no constant term (c = 0). Therefore, A must be equal to 0 in order for the quadratic function to pass through the origin (when all other variables are set to 0). Thus, the answer is C) zero.

Question 6

If Q = K²L² the MP_K is A)constant B)diminishing C)increasing

Accepted Answer

The MPS (Marginal Propensity to Save) formula is given by the change in saving (ΔS) divided by the change in income (ΔY). In the given expression, "²" represents a pattern where saving increases as income increases, but the rate of increase in saving remains constant (as indicated by the consistent pattern of S1). However, the MPS formula specifically looks at the change in saving relative to the change in income, not the absolute level of saving. The expression "MP_K" suggests that as income increases (indicated by "U1"), the MPS is being considered at different levels of income, but the MPS itself remains constant (as indicated by "B1" for the base level and "B0" for the comparison level, suggesting no change in the MPS). However, the correct interpretation of the given expression in the context of the question indicates that the MPS is actually increasing, which is a misunderstanding of the provided symbols and their intended meaning. The correct interpretation should focus on the change in saving relative to the change in income, which is not directly provided by the given expression. Therefore, the correct answer should be based on the standard economic principle that MPS can either be constant or change (increase or decrease) depending on the specific economic model or context, but the provided expression does not accurately reflect these principles.

Question 7

A production function measures how an individual maximizes utility.&#10;A)a firm transforms output into input.&#10;B)a firm transforms inputs into output.&#10;C)a firm minimizes cost.

Accepted Answer

A production function is a mathematical relationship that shows the maximum output that can be produced with any given set of inputs. In other words, it measures how a firm transforms inputs (such as labor and capital) into output. This is why B is the best choice. A is incorrect because a firm transforms inputs into output, not the other way around. C is incorrect because a firm may seek to minimize costs, but this is not the primary purpose of a production function.

Question 8

With a cubic production with fixed capital Q = A + BL + CL² + DL³ and a shape shown above,A is A)positive and greater than B. B)positive and less than B. C)zero. D)negative.

Accepted Answer

The answer of   With a cubic production with...

Question 9

With a quadratic production with fixed capital Q = A + BL + CL² and the shape shown above,B is A)positive. B)zero. C)negative and less than C. D)negative and greater than C.

Accepted Answer

The answer of   With a quadratic production with...

Question 10

Suppose Q = K^aL^b,if a + b < 1 the isoquants will be A)upward sloping. B)progressively closer together at higher quantities. C)progressively further apart at higher quantities. D)equally spaced.

Accepted Answer

CThe given equation Q = K^aL^b represents a production function with increasing returns to scale if a + b > 1. This implies that as the quantity of output increases, the production becomes more efficient. Therefore, the isoquants, which represent combinations of inputs that yield the same output, will be progressively closer together at higher quantities (B) because less input is needed for each additional unit of output. Additionally, this efficiency can also be interpreted as the isoquants being progressively further apart at lower quantities of output (C), reflecting the increased input requirement for initial units of output.

Question 11

If Q = K²L² the MP_L is A)constant B)diminishing C)increasing

Accepted Answer

The answer of If Q = K²L² the MP_L is A)constant B)diminishing C)increasing...

Question 12

If production is given by Q = KL,doubling both inputs&#10;A)more than doubles output.&#10;B)exactly doubles output.&#10;C)increases output but does not double it.&#10;D)leaves output unchanged.

Accepted Answer

The answer of If production is given by Q =...

Question 13

With a cubic production with fixed capital Q = A + BL + CL² + DL³ and a shape shown above,C is A)positive. B)zero. C)negative and less than D. D)negative and greater than D.

Accepted Answer

The answer of    &#10;With a cubic production...

Question 14

When isoquants get progressively further apart there is&#10;A)increasing returns to scale&#10;B)decreasing returns to scale&#10;C)constant returns to scale

Accepted Answer

The answer of When isoquants get progressively further apart there...

Question 15

If Q = K^1/3L² the MP_K is A)constant B)diminishing C)increasing

Accepted Answer

The answer of If Q = K^1/3L² the MP_K is A)constant B)diminishing C)increasing...

Question 16

A firm is defined as&#10;A)a president,some vice presidents,and some employees.&#10;B)any organization that wants to make a profit.&#10;C)any accumulation of productive assets.&#10;D)any organization that turns inputs into outputs.

Accepted Answer

The answer of A firm is defined as&#10;A)a president,some vice...

Question 17

If production is given by Q = K^sL^b,(a + b < 1)doubling both inputs A)more than doubles output. B)exactly doubles output. C)increases output but does not double it. D)leaves output unchanged.

Accepted Answer

The answer of If production is given by Q =...

Question 18

Suppose electricity (E)can be produced with coal (C)or gas (G)to operate steam turbines (T).Suppose gas is more efficiently burned than coal but that they are otherwise perfect substitutes.E = min((G + .5C),T). The isoquants between gas and coal will be

A)hyperbolas
B)quarter circles
C)straight lines

Accepted Answer

The answer of Suppose electricity (E)can be produced with coal...

Question 19

If Q = K^1/3L²the MP_L is A)constant B)diminishing C)increasing

Accepted Answer

The answer of If Q = K^1/3L²the MP_L is A)constant B)diminishing C)increasing...

Question 20

If Q = K^1/2L^1/2 the MP_L is A)constant B)increasing C)diminishing

Accepted Answer

The answer of If Q = K^1/2L^1/2 the MP_L is A)constant B)increasing C)diminishing...

Question 21

If more and more labor is employed while keeping all other inputs constant,the marginal physical productivity of labor&#10;A)will eventually increase.&#10;B)will eventually decrease.&#10;C)will eventually remain constant.&#10;D)cannot tell from the information provided.

Accepted Answer

The answer of If more and more labor is employed...

Question 22

A firm's rate of technical substitution is represented graphically by&#10;A)the slope of the line connecting the origin with the relevant point on the isoquant.&#10;B)the negative of the slope of the line connecting the origin with the relevant point on the isoquant.&#10;C)the slope of the isoquant at the relevant point.&#10;D)the negative of the slope of the isoquant at the relevant point.

Accepted Answer

The answer of A firm's rate of technical substitution is...

Question 23

A fixed-proportion production function has isoquants that are&#10;A)almost flat (i.e.,the isoquants are almost straight lines).&#10;B)L-shaped.&#10;C)normally shaped (rectangular hyperbolas).&#10;D)None of the above.

Accepted Answer

The answer of A fixed-proportion production function has isoquants that...

Question 24

The production function  &#10;A)exhibits constant returns to scale and constant marginal productivities for K and L.&#10;B)exhibits diminishing returns to scale and diminishing marginal productivities for K and L.&#10;C)exhibits constant returns to scale and diminishing marginal productivities for K and L.&#10;D)exhibits diminishing returns to scale and constant marginal productivities for K and L..

Accepted Answer

The answer of The production function  &#10;A)exhibits constant returns...

Question 25

Graphically,the average productivity of labor would be illustrated by the slope of the marginal productivity curve at the relevant point.&#10;A)the slope of the total product curve at the relevant point.&#10;B)the slope of the marginal productivity curve at the relevant point.&#10;C)the negative of the slope of the marginal productivity curve at the relevant point.&#10;D)the slope of the chord connecting the origin with the relevant point on the total output curve.

Accepted Answer

The answer of Graphically,the average productivity of labor would be...

Question 26

A production function may exhibit&#10;A)constant returns to scale and diminishing marginal productivities to all inputs.&#10;B)constant returns to scale and diminishing marginal productivities to all but one input,but at least one input must have a constant marginal productivity.&#10;C)constant returns to scale and diminishing marginal productivity to at most one input.&#10;D)constant returns to scale and diminishing marginal productivities for no inputs.

Accepted Answer

The answer of A production function may exhibit&#10;A)constant returns to...

Question 27

If,as a result of doubling all its inputs,a firm can more than double its output,the firm's production function exhibits&#10;A)constant returns to scale.&#10;B)increasing returns to scale.&#10;C)decreasing returns to scale.&#10;D)increasing marginal productivity to at least one input.

Accepted Answer

The answer of If,as a result of doubling all its...

Question 28

Suppose the production function for good q is given by q = 3K + 2 L where K and L are capital and labor inputs.Consider three statements about this function: Which of these statements is true?
I.The function exhibits constant returns to scale.
II.The function exhibits diminishing marginal productivities to all inputs.
III.The function has a constant rate of technical substitution.

A)All of them.
B)None of them.
C)I and II but not III.
D)I and III but not II.
E)only I.

Accepted Answer

The answer of Suppose the production function for good q...

Question 29

For a fixed proportion production function,at the vertex of any of the (L-shaped)isoquants the marginal productivity of either input is&#10;A)constant&#10;B)zero.&#10;C)negative.&#10;D)a value that cannot be determined.

Accepted Answer

The answer of For a fixed proportion production function,at the...

Question 30

The average productivity of capital is defined as the ratio of total capital employed to the total output produced.&#10;A)the extra output produced by employing one more unit of capital while holding other inputs constant.&#10;B)the extra output produced by employing one more unit of capital while allowing other inputs to vary.&#10;C)the ratio of total output produced to the quantity of capital employed.

Accepted Answer

The answer of The average productivity of capital is defined...

Question 31

A firm's isoquant shows&#10;A)the amount of labor needed to produce a given level of output with capital held constant.&#10;B)the amount of capital needed to produce a given level of output with labor held constant.&#10;C)the various combinations of capital and labor that will produce a given amount of output.&#10;D)None of the above.

Accepted Answer

The answer of A firm's isoquant shows&#10;A)the amount of labor...

Question 32

The marginal rate of technical substitution of labor for capital measures&#10;A)the amount by which capital input can be reduced while holding quantity produced constant when one more unit of labor is used.&#10;B)the amount by which labor input can be reduced while holding quantity produced constant when one more unit of capital is used.&#10;C)the ratio of total labor to total capital.&#10;D)the ratio of total capital to total labor.

Accepted Answer

The answer of The marginal rate of technical substitution of...

Question 33

The marginal physical product of labor is&#10;A)the slope of the total output curve at the relevant point.&#10;B)the negative of the slope of the total output curve at the relevant point.&#10;C)the slope of the line connecting the origin with the relevant point on the total output curve.&#10;D)the negative of the slope of the line connecting the origin with the relevant point on the total output curve.

Accepted Answer

The answer of The marginal physical product of labor is&#10;A)the...

Question 34

A technical innovation in the production of automobiles by Ford Motor Company's for 1 million cars per year would necessarily&#10;A)shift the &#34;1 million car&#34; isoquant away from the origin.&#10;B)shift the &#34;1 million car&#34; isoquant toward the origin.&#10;C)cause 1 million cars to be produced with more capital and less labor.&#10;D)cause 1 million cars to be produced with more labor and less capital.

Accepted Answer

The answer of A technical innovation in the production of...

Question 35

The marginal physical product of labor is defined as&#10;A)a firm's total output divided by total labor input.&#10;B)the extra output produced by employing one more unit of labor while allowing other inputs to vary.&#10;C)the extra output produced by employing one more unit of labor while holding other inputs constant.&#10;D)the extra output produced by employing one more unit of capital while holding labor input constant.

Accepted Answer

The answer of The marginal physical product of labor is...

Question 36

A rise in the average productivity of labor&#10;A)always reflects technical progress.&#10;B)reflects technical progress if other input usage hasn't changed.&#10;C)reflects technical progress only if labor input hasn't changed.&#10;D)reflects technical progress only if the quantity of output is increased.

Accepted Answer

The answer of A rise in the average productivity of...

Deck 6: Production