Deck 2: The Economics of Production

Question 1

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the TPP of using 0 units of input?

A) 1
B) 0
C) 10
D) -10

Answer 1

0

Question 2

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the APP of using 1 unit of input?

A) 0
B) 10
C) -10
D) 1

Answer 2

10

Question 3

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the TPP of using 2 units of input?

A) 20
B) -10
C) 30
D) 10

Answer 3

30

Question 4

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the MPP of using 2 units of input?

A) 30
B) 10
C) 20
D) -10

Question 5

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the APP of using 3 units of input?

A) 10
B) 15
C) 20
D) -10

Question 6

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the APP of using 4 units of input?

A) 10
B) 12.5
C) 15
D) -10

Question 7

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the MPP of using 4 units of input?

A) 5
B) 0
C) 10
D) -10

Question 8

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the APP of using 5 units of input?

A) 5
B) 9
C) 10
D) -10

Question 9

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the MPP of using 5 units of input?

A) 5
B) 10
C) -10
D) -5

Question 10

Production Function.
Below is the production function for an agribusiness firm, where X is the input, and Y is the output.
$\begin{array}{llll}\underline{\mathrm{X}} & \underline{\mathrm{Y}} & \underline{\text { APP }} & \underline{\mathrm{MPP}} \\0 & \underline {\quad} & -- & -- \\1 & 10 & \underline {\quad} & 10 \\2 &\underline {\quad} & 15& \underline {\quad} \\3 & 45& \underline {\quad} & 15 \\4 & 50 &\underline {\quad} & \underline {\quad} \\5 & 45 &\underline {\quad} & \underline {\quad} \\6&\underline {\quad} &6&-9\end{array}$

-What is the TPP of using 6 units of input?

A) 36
B) 24
C) 9
D) -9

Question 11

At the point where APP = MPP:

A) is the border between Stage II and Stage III of production
B) APP is decreasing
C) MPP is decreasing
D) MPP is constant

Question 12

Technological change in agricultural production:

A) shifts the production function upwards
B) provides less output for the same amount of input
C) does not affect the production function
D) decreases the net output of the production process

Question 13

The Law of Diminishing Marginal Returns states that:

A) scarcity forces us to choose.
B) if more input is used in a firm, holding all other inputs constant, the additional product will eventually decline.
C) when diminishing marginal returns set in, output declines.
D) as more input is applied to a productive enterprise, output decreases.

Question 14

The relationship between average and marginal physical product means:

A) average chases the marginal
B) if marginal is above average, average is decreasing
C) when marginal=average, average is decreasing
D) marginal chases the average

Question 15

A student who has studied all night to the point of falling asleep during an exam is in what stage of production?

A) one
B) two
C) three
D) four

Question 16

Which of the following changes will change a firm's production function?

A) changes in the cost of production
B) changes in technology
C) changes in the prices of resources available
D) changes in product prices

Question 17

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the MPP of using the 4th unit of input?

A) 7
B) 2
C) 3
D) 5

Question 18

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the APP of using the 6th unit of input?

A) 5
B) 7
C) 3
D) 2

Question 19

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the MPP of using the 6th unit of input?

A) 2
B) -2
C) 3
D) -3

Question 20

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the TPP of using the 3rd unit of input?

A) 9
B) 20
C) 13
D) 39

Question 21

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the TPP of using the 5th unit of input?

A) 43
B) 44
C) 45
D) 39

Question 22

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What are the units for TPP?

A) oz
B) bu
C) bu/oz
D) oz/bu

Question 23

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What are the units for MPP?

A) bu
B) oz
C) oz/bu
D) bu/oz

Question 24

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What are the units for APP?

A) bu
B) oz
C) oz/bu
D) bu/oz

Question 25

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-What is the TPP of using the 2^nd unit of input?

A) 0
B) 10
C) 15
D) 30

Question 26

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-Diminishing returns set in at what level of input?

A) X = 3
B) X = 4
C) X = 5
D) X = 6

Question 27

Wheat Farm.
Below is the production function for a wheat farm, where the input is chemicals (oz) and the output is wheat (bu).
$\begin{array}{llll}\underline{\mathrm{X}(\mathrm{oz})} &\underline{\mathrm{Y}(\mathrm{bu})} & \underline{\mathrm{APP}(.)} & \underline{\mathrm{MPP}(.)} \\0&0&--&--\\1 & 10 &\underline {\quad} &\underline {\quad}\\2 & 30 & \underline {\quad}&\underline {\quad} \\3 &\underline {\quad}&{13} &\underline {\quad} \\4 &{44} & \underline {\quad}& \underline {\quad} \\5 & \underline {\quad} & \underline {\quad}& 1 \\6 & 42& \underline {\quad}&\underline {\quad}\end{array}$

-The production function for the wheat farm represents:

A) the economic relationship between inputs and outputs
B) the physical relationship between inputs and outputs
C) the quantity of chemicals produced
D) the supply of wheat

Question 28

The assumption of ceteris paribus refers to:

A) modus operandi
B) habeas corpus
C) scarcity
D) holding all else constant

Question 29

An economist thinks that a county yield contest that rewards high levels of output is:

A) a good idea, since it provides the correct incentives to growers
B) not worth the trouble, due to chemicals and fertilizer "burn"
C) a poor goal, relative to an economic goal
D) a scarce commodity, where benefits outweigh costs

Question 30

The real world is enormously complicated. Therefore:

A) we use production theory, which is also complex
B) we must simplify the real world in order to understand it
C) we use the physical relationship between inputs and outputs
D) we use the SR instead of the LR

Question 31

A typical production function

A) increases at an increasing rate, then increases at a decreasing rate
B) increases at an increasing rate, then decreases at a decreasing rate
C) decreases at an increasing rate, then increases at a decreasing rate
D) decreases at an increasing rate, then decreases at a decreasing rate

Question 32

Marginal Physical Product

A) is equal to the rate of change in APP
B) is the rate of change in TPP
C) is equal to APP for an increasing returns production function
D) all of the other answers

Question 33

If MPP > APP:

A) MPP is increasing
B) MPP is decreasing
C) APP is increasing
D) APP is decreasing

Question 34

APP represents:

A) overall productivity
B) how productive all of the units of input are
C) how productive the last unit of input is
D) scarcity

Question 35

MPP represents:

A) overall productivity
B) how productive all of the units of input are
C) how productive the last unit of input is
D) scarcity

Question 36

If average productivity is increasing:

A) APP = MPP
B) APP > MPP
C) APP < MPP
D) not enough information to answer

Question 37

If average productivity is increasing:

A) MPP is negative and declining
B) MPP is increasing
C) MPP is decreasing
D) not enough information to answer

Question 38

Diminishing returns begins to occur where:

A) TPP increases at an increasing rate
B) TPP increases at a decreasing rate
C) TPP decreases at an increasing rate
D) TPP decreases at a decreasing rate

Question 39

In the equation: Y = f(A | K, L, M)

A) land is fixed
B) land is variable
C) output is fixed
D) capital is variable

Question 40

The Law of Diminishing Marginal Returns implies that:

A) US agriculture is in Stage III
B) marginal productivity will eventually decline
C) biotechnology will not continue to increase yields
D) if we add more fertilizer to a wheat field, output will decrease

Question 41

Stage II occurs where:

A) MPP > APP and MPP > 0
B) MPP < APP and MPP > 0
C) MPP < APP and APP > 0
D) MPP < APP and MPP < 0

Question 42

The Law of Diminishing Returns implies that:

A) MPP is declining
B) productivity will eventually decrease
C) goods are not scarce
D) TPP will eventually become negative

Question 43

In the following production function: Y = f(L | K, A, M):

A) ceteris paribus does not hold
B) labor is held constant
C) land is allowed to vary
D) labor is allowed to vary

Question 44

The TPP for using zero units on input is equal to:

A) 0
B) depends
C) Not enough information to answer
D) 1

Question 45

APP is defined as:

A) MPP/X
B) MPP/Y
C) TPP/X
D) TPP/Y

Question 46

Rational producers always operate in:

A) Stage I
B) Stage II
C) Stage III
D) it depends on the situation

Question 47

MPP is defined as:

A) change in output given a change in input
B) ΔTPP/ΔX
C) ΔY/ΔX
D) all of the other answers

Question 48

Stage III:

A) uses too little input
B) uses resources efficiently
C) produces too much output
D) uses too much input

Question 49

Stage I:

A) uses too little input
B) uses resources efficiently
C) produces too much output
D) uses too much input

Question 50

In the real world, the Law of Diminishing Marginal Productivity:

A) does not hold due to economic growth
B) holds, but only in some locations
C) does not hold for agriculture, which continues to feed the world
D) holds, but can be overcome with technological change

Question 51

Define the term, "production function."

Question 52

Write a mathematical relationship for wheat production. Define all variables.

Question 53

Suppose that a veterinary researcher would like to understand the impact of growth hormones on horse health. Describe using math and words how the researcher would set up this experiment.

Question 54

Explain how we would know if a wheat farm in North Dakota is in the short run or the long run.

Question 55

How many years will it take for a beef producer to be in the long run? Explain.

Question 56

Suppose that the production function for wheat is characterized by the following data:
A. Define the term, "production function" and explain the usefulness of studying production.
B. Define and explain the terms, TPP, APP, and MPP.
C. Complete a chart that includes TPP, APP, and MPP.
D. Complete a graph of TPP, APP, and MPP.

Question 57

Suppose that the input (X) wheat (bu), is ground into output (Y) flour (lbs) at a flour mill. Use the data for X and Y to calculate TPP, APP, and MPP in the chart below. Write the units for X, Y, TPP, APP, and MPP below.

Question 58

Graph TPP, APP, and MPP. Be sure to include labels and units.

Question 59

Identify the three stages of production in the graph above.

Question 60

State and explain the relationship between average and marginal productivity.

Question 61

Identify the point on the TPP graph where diminishing returns begin.

Question 62

Define the Law of Diminishing Returns, and explain the real world implications.

Question 63

Define and explain the term, "ceteris paribus." Science is also called, "reductionism." Explain what this means. Given the complexity of the real world, doesn't economics make too many assumptions to be useful? Carefully explain why or why not.

Question 64

Use McDonalds as an example to define and explain the terms, "immediate run," "short run," and "long run."

Question 65

Write an essay and use a graph to define and explain the three stages of production. Use a real-world example from your own life to demonstrate how these stages can be used to help us understand the human condition.

Question 66

Write an essay and use a graph to define and explain technological change. Find a real-world example of technological change from the history of food and agriculture. Write an essay on the role of technological change on the history of humankind. How important will technological change be in the future? Carefully explain your examples and positions.

Question 67

Suppose that nitrogen (lbs) is used to produce corn (bu) on a farm. The price of nitrogen is P_X=$4/lb, and the price of corn is P_Y=$2/bu. Use the data for X and Y to complete the table below, including units.

Question 68

Graph TPP, APP, and MPP from question 17. Be sure to include labels and units.