Question 1

A firm's _______ shows the amount of output a firm can produce from given amounts of inputs using efficient production methods.&#10;A) Production possibilities set&#10;B) Efficient production frontier&#10;C) Production function&#10;D) Production possibilities curve

Accepted Answer

A firm's production function shows the relationship between the quantity of inputs used in production and the quantity of output from production. It outlines how much output can be produced from given amounts of inputs using efficient production methods.

Question 2

Suppose that a firm uses both labour (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5?L?K. If the firm has 100 units of capital, what is its short-run production function?

A) Q=F(K)=50?K
B) Q = F(L) = 500?L
C) Q = F(L,K) = 50?L?K
D) Q=F(L)=50?L

Q=F(L)=50?L

Accepted Answer

In the short run, capital (K) is fixed at 100 units, so the production function becomes Q = 5√L*√100 = 5*10√L = 50√L, which is represented by option D.

Question 3

Which of the following is the formula for the average product of labour?&#10;A) F(L) - F(L - ?L)&#10;B) F(L)/L&#10;C) F(L)/?L&#10;D) (F(L) - F(L - ?L))/?L

Accepted Answer

The average product of labour is calculated by dividing the total output (F(L)) by the quantity of labour (L) used to produce that output, hence the formula is F(L)/L.

Question 4

When labour inputs are finely divisible, the average product of labour curve is ______ sloping at L if the marginal product is ______ the average product.&#10;A) Downward; above&#10;B) Upward; above&#10;C) Upward; below&#10;D) Vertical; equal to

Accepted Answer

When the marginal product of labor is above the average product, it means that each additional unit of labor is producing more than the average, which pulls the average product up, resulting in an upward sloping average product of labor curve at that point.

Question 5

Which of the following is NOT a property of isoquants?&#10;A) Isoquants curves are thin&#10;B) Isoquants may slope upward or downward&#10;C) Isoquants for the same technology never cross&#10;D) Higher-level isoquants lie farther from the origin

Accepted Answer

Isoquants, which represent combinations of inputs that yield the same level of output, always slope downward. This is because to maintain the same level of output, an increase in one input must be offset by a decrease in another input.

Question 6

Suppose that the marginal product of a firm's labour is 10 units of output per hour. Also assume that the marginal product of the firm's capital is 30 units of output per hour. In this case, the marginal rate of technical substitution for labour with capital is

A) 3
B) 300
C) 40
D) 1/3

Accepted Answer

The marginal rate of technical substitution (MRTS) is the rate at which a firm can substitute one input for another while keeping output constant. In this case, the MRTS is equal to the ratio of the marginal product of labour to the marginal product of capital, which is 10/30 = 1/3.

Question 7

&#10;&#10;-Refer to Figure above. Which diagram represents isoquants for fixed-proportions technology?&#10;A) A&#10;B) B&#10;C) C&#10;D) D

Accepted Answer

The answer of  &#10;&#10;-Refer to Figure above. Which diagram...

Question 8

Two inputs ______ when they must be combined in a fixed ratio.&#10;A) Are perfect substitutes&#10;B) Are perfect complements&#10;C) Represent Cobb-Douglas technology&#10;D) Are fixed inputs

Accepted Answer

When two inputs must be combined in a fixed ratio to produce a certain output, they are considered perfect complements. This means the inputs work best together in a specific proportion, illustrating a key characteristic of perfect complementarity.

Question 9

&#10;&#10;-Refer to Figure above. Which graph represents decreasing returns to scale?&#10;A) A&#10;B) B&#10;C) C&#10;D) Both graph A and graph C

Accepted Answer

Graph C represents decreasing returns to scale, where output increases by a smaller proportion than the increase in inputs.

Question 10

Which of the following statements regarding comparisons of productivity across two firms is true? A) The firm with the higher AP_L is the more productive firm B) The firm with the higher MP_L is the more productive firm C) The firm with the lower MP_L is the more productive firm D) The average product of labour can vary with the choice of inputs and the level of outputs, so the firm with the higher AP_L may not be the most productive

Accepted Answer

The average product of labor (APL) depends on the combination of inputs used and the output level produced, making it an unreliable sole indicator of productivity across firms. Different firms might have different efficiencies, technologies, or production methods, affecting their productivity independently of their APL.

Question 11

The productivity changes resulting from research and development would be best represented by&#10;A) An upward shift of a firm's production function&#10;B) A downward shift of a firm's production function&#10;C) The firm's isoquants shifting away from the origin&#10;D) A movement to the northeast along the firm's production function

Accepted Answer

The answer of The productivity changes resulting from research and...

Question 12

Suppose a firm uses both labour (L) and capital (K) and its long-run production function is given by the expression Q = F(L,K) = L2&#8730;(L + 2K). The firm currently uses 100 units of capital. Assuming labour is finely divisible, graph the firm's short-run production function for the first five workers.

Accepted Answer

The answer of Suppose a firm uses both labour (L)...

Question 13

Suppose a firm uses both labour (L) and capital (K) and its long-run production function is given by the expression Q = F(L,K) = 2L&#8730;(L + K). The firm currently uses 10 units of capital. Complete the following table:

Accepted Answer

The answer of Suppose a firm uses both labour (L)...

Deck 3: Technology and Production