Deck 6: Production

Question 1

The short run is

A)less than a year.
B)three years.
C)however long it takes to produce the planned output.
D)a time period in which at least one input is fixed.
E)a time period in which at least one set of outputs has been decided upon.

Answer 1

D

Question 2

Which of the following ideas were central to the conclusions drawn by Thomas Malthus in his 1798 "Essay on the Principle of Population"?

A)Short-run time period
B)Shortage of labor
C)Law of diminishing resource availability
D)Law of diminishing returns

Answer 2

D

Question 3

Technological improvement

A)can hide the presence of diminishing returns.
B)can be shown as a shift in the total product curve.
C)allows more output to be produced with the same combination of inputs.
D)All of the above are true.

Answer 3

D

Question 4

A farmer uses L units of labor and K units of capital to produce Q units of corn using a production function F(K,L).A production plan that uses K' = L' = 10 to produce Q' units of corn where Q' < F(10,10)is said to be

A)technically feasible and efficient.
B)technically unfeasible and efficient.
C)technically feasible and inefficient.
D)technically unfeasible and inefficient.
E)none of the above

Question 5

A function that indicates the maximum output per unit of time that a firm can produce,for every combination of inputs with a given technology,is called

A)an isoquant.
B)a production possibility curve.
C)a production function.
D)an isocost function.

Question 6

The law of diminishing returns assumes that

A)there is at least one fixed input.
B)all inputs are changed by the same percentage.
C)additional inputs are added in smaller and smaller increments.
D)all inputs are held constant.

Question 7

The slope of the total product curve is the

A)average product.
B)slope of a line from the origin to the point.
C)marginal product.
D)marginal rate of technical substitution.

Question 8

Which of the following inputs are variable in the long run?

A)labor.
B)capital and equipment.
C)plant size.
D)all of these.

Question 9

Use the following two statements to answer this question: I.Production functions describe what is technically feasible when the firm operates efficiently.
II)The production function shows the least cost method of producing a given level of output.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 10

Suppose there are ten identical manufacturing firms that produce computer chips with machinery (capital,K)and labor (L),and each firm has a production function of the form q = 10KL^0.5.What is the industry-level production function?

A)Q = 10K¹⁰L⁵
B)Q = 100KL^0.5
C)Q = 100L^0.5
D)none of the above

Question 11

For many firms,capital is the production input that is typically fixed in the short run.Which of the following firms would face the longest time required to adjust its capital inputs?

A)Firm that makes DVD players.
B)Computer chip fabricator
C)Flat-screen TV manufacturer
D)Nuclear power plant

Question 12

When the average product is decreasing,marginal product

A)equals average product.
B)is increasing.
C)exceeds average product.
D)is decreasing.
E)is less than average product.

Question 13

We manufacturer automobiles given the production function q = 5KL where q is the number of autos assembled per eight-hour shift,K is the number of robots used on the assembly line (capital)and L is the number of workers hired per hour (labor).If we use K=10 robots and L=10 workers in order to produce q = 450 autos per shift,then we know that production is:

A)technologically efficient.
B)technologically inefficient.
C)maximized.
D)optimal.

Question 14

The marginal product of an input is

A)total product divided by the amount of the input used to produce this amount of output.
B)the addition to total output that adds nothing to total revenue.
C)the addition to total output that adds nothing to profit.
D)the addition to total output due to the addition of one unit of all other inputs.
E)the addition to total output due to the addition of the last unit of an input,holding all other inputs constant.

Question 15

The law of diminishing returns refers to diminishing

A)total returns.
B)marginal returns.
C)average returns.
D)all of these.

Question 16

Writing total output as Q,change in output as △Q,total labor employment as L,and change in labor employment as △L,the marginal product of labor can be written algebraically as

A)ΔQ ∙ L.
B)Q / L.
C)ΔL / ΔQ.
D)ΔQ / ΔL.

Question 17

Joe owns a small coffee shop,and his production function is q = 3KL where q is total output in cups per hour,K is the number of coffee machines (capital),and L is the number of employees hired per hour (labor).If Joe's capital is currently fixed at K=3 machines,what is his short-run production function?

A)q = 3L
B)q = 3L²
C)q = 9L
D)q = 3K²

Question 18

A production function assumes a given

A)technology.
B)set of input prices.
C)ratio of input prices.
D)amount of capital and labor.
E)amount of output.

Question 19

When labor usage is at 12 units,output is 36 units.From this we may infer that

A)the marginal product of labor is 3.
B)the total product of labor is 1/3.
C)the average product of labor is 3.
D)none of the above

Question 20

A production function defines the output that can be produced

A)at the lowest cost,given the inputs available.
B)for the average firm.
C)if the firm is technically efficient.
D)in a given time period if no additional inputs are hired.
E)as technology changes over time.

Question 21

For consideration of such issues as labor's productivity growth nationwide,the relevant measure is the

A)marginal product of labor.
B)average product of labor.
C)total product of labor.
D)wage.
E)cost of capital.

Question 22

Figure 6.1
Refer to Figure 6.1.At point C

A)the marginal product of labor is greater than the average product of labor.
B)the average product of labor is greater than the marginal product of labor.
C)the marginal product of labor and the average product of labor are equal.
D)the marginal product of labor and the average product of labor are both increasing.
E)Both B and D are correct.

Question 23

Assume that average product for six workers is fifteen.If the marginal product of the seventh worker is eighteen,

A)marginal product is rising.
B)marginal product is falling.
C)average product is rising.
D)average product is falling.

Question 24

According to the law of diminishing returns

A)the total product of an input will eventually be negative.
B)the total product of an input will eventually decline.
C)the marginal product of an input will eventually be negative.
D)the marginal product of an input will eventually decline.
E)none of the above

Question 25

Figure 6.1
Refer to Figure 6.1.At which point on the total product curve is the average product of labor the highest?

A)point A.
B)point B.
C)point C.
D)point D.
E)none of the above

Question 26

Which would not increase the productivity of labor?

A)An increase in the size of the labor force
B)An increase in the quality of capital
C)An increase in the quantity of capital
D)An increase in technology
E)An increase in the efficiency of energy

Question 27

Use the following two statements to answer this question: I.The marginal product of labor is the slope of the line from the origin to the total product curve at that level of labor usage.
II The average product of labor is the slope of the line that is tangent to the total product curve at that level of labor usage.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 28

The link between the productivity of labor and the standard of living is

A)tenuous and changing.
B)inverse.
C)that over the long run consumers as a whole can increase their rate of consumption only by increasing labor productivity.
D)that over the long run consumers' rate of consumption is not related to labor productivity.
E)that the productivity of labor grows much more erratically than the standard of living.

Question 29

What describes the graphical relationship between average product and marginal product?

A)Average product cuts marginal product from above,at the maximum point of marginal product.
B)Average product cuts marginal product from below,at the maximum point of marginal product.
C)Marginal product cuts average product from above,at the maximum point of average product.
D)Marginal product cuts average product from below,at the maximum point of average product.
E)Average and marginal product do not intersect.

Question 30

Marginal product crosses the horizontal axis (is equal to zero)at the point where

A)average product is maximized.
B)total product is maximized.
C)diminishing returns set in.
D)output per worker reaches a maximum.
E)All of the above are true.

Question 31

If the law of diminishing returns applies to labor then

A)the marginal product of labor must eventually become negative.
B)the average product of labor must eventually become negative.
C)the marginal product of labor must rise and then fall as employment rises.
D)the average product of labor must rise and then fall as employment increases.
E)after some level of employment,the marginal product of labor must fall.

Question 32

Consider the following statements when answering this question; I.Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels.This technology obeys the law of diminishing returns.
II)Suppose a semiconductor chip factory uses a technology where the marginal product of labor rises,then is constant and finally falls as employment increases.This technology obeys the law of diminishing returns.

A)I is true,and II is false.
B)I is false,and II is true.
C)Both I and II are true.
D)Both I and II are false.

Question 33

Figure 6.1
Refer to Figure 6.1.Which of the following statements is false?

A)At point E the marginal product of labor is decreasing.
B)At point E the marginal product of labor is negative.
C)At point E the average product of labor is decreasing.
D)At point E the average product of labor is negative.
E)At point E the marginal product of labor is less than the average product of labor.

Question 34

The Malthusian dilemma relates to marginal product in that

A)starvation can be averted only if marginal product is constant.
B)because of diminishing marginal product,the amount of food produced by each additional member of the population increases.
C)because of diminishing marginal product,the amount of food produced by each additional member of the population decreases.
D)because of diminishing marginal product,the wage falls as the population decreases.
E)because of diminishing average product,the population will not have additional capital to work with.

Question 35

Consider the following statements when answering this question; I.Whenever the marginal product of labor curve is a downward sloping curve,the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve.
II)If a firm uses only labor to produce,and the production function is given by a straight line,then the marginal product of labor always equals the average product of labor as labor employment expands.

A)I is true,and II is false.
B)I is false,and II is true.
C)Both I and II are true.
D)Both I and II are false.

Question 36

In a certain textile firm,labor is the only short term variable input.The manager notices that the marginal product of labor is the same for each unit of labor,which implies that

A)the average product of labor is always greater that the marginal product of labor
B)the average product of labor is always equal to the marginal product of labor
C)the average product of labor is always less than the marginal product of labor
D)as more labor is used,the average product of labor falls
E)there is no unambiguous relationship between labor's marginal and average products.

Question 37

The law of diminishing returns applies to

A)the short run only.
B)the long run only.
C)both the short and the long run.
D)neither the short nor the long run.
E)all inputs,with no reference to the time period.

Question 38

One of the factors contributing to the fact that labor productivity is higher in the U.S.than in the People's Republic of China is

A)China's larger stock of capital.
B)the higher capital/labor ratio in China.
C)the higher capital/labor ratio in the U.S.
D)China's smaller stock of fossil fuels.
E)the fact that much labor in the U.S.is in management.

Question 39

At a given level of labor employment,knowing the difference between the average product of labor and the marginal product of labor tells you

A)whether increasing labor use raises output.
B)whether increasing labor use changes the marginal product of labor.
C)whether economies of scale exist.
D)whether the law of diminishing returns applies.
E)how increasing labor use alters the average product of labor.

Question 40

Figure 6.1
Refer to Figure 6.1.At point A,the marginal product of labor is

A)rising.
B)at its minimum.
C)at its maximum.
D)diminishing.

Question 41

If capital is measured on the vertical axis and labor is measured on the horizontal axis,the slope of an isoquant can be interpreted as the

A)rate at which the firm can replace capital with labor without changing the output rate.
B)average rate at which the firm can replace capital with labor without changing the output rate.
C)marginal product of labor.
D)marginal product of capital.

Question 42

The rate at which one input can be reduced per additional unit of the other input,while holding output constant,is measured by the

A)marginal rate of substitution.
B)marginal rate of technical substitution.
C)slope of the isocost curve.
D)average product of the input.

Question 43

An isoquant

A)must be linear.
B)cannot have a negative slope.
C)is a curve that shows all the combinations of inputs that yield the same total output.
D)is a curve that shows the maximum total output as a function of the level of labor input.
E)is a curve that shows all possible output levels that can be produced at the same cost.

Question 44

If we take the production function and hold the level of output constant,allowing the amounts of capital and labor to vary,the curve that is traced out is called:

A)the total product.
B)an isoquant.
C)the average product.
D)the marginal product.
E)none of the above

Question 45

You operate a car detailing business with a fixed amount of machinery (capital),but you have recently altered the number of workers that you employ per hour.Three employees can generate an average product of 4 cars per person in each hour,and five employees can generate an average product of 3 cars per person in each hour.What is the marginal product of labor as you increase the labor from three to five employees?

A)MP = 3 cars
B)MP = 1.5 cars
C)MP = 15 cars
D)MP = -1 cars

Question 46

An upward sloping isoquant

A)can be derived from a production function with one input
B)can be derived from a production function that uses more than one input where reductions in the use of any input always reduces output
C)cannot be derived from a production function when a firm is assumed to maximize profits
D)can be derived whenever one input to production is available at zero cost to the firm
E)none of the above

Question 47

The function which shows combinations of inputs that yield the same output is called a(n)

A)isoquant curve.
B)isocost curve.
C)production function.
D)production possibilities frontier.

Question 48

Two isoquants,which represent different output levels but are derived from the same production function,cannot cross because

A)isoquants represent different utility levels
B)this would violate a technical efficiency condition
C)isoquants are downward sloping
D)additional inputs will not be used by profit maximizing firms if those inputs decrease output
E)Both B and D are true.

Question 49

As we move downward along a typical isoquant,the slope of the isoquant

A)becomes flatter.
B)becomes steeper.
C)remains constant.
D)becomes linear.

Question 50

Use the following two statements to answer this question: I.Isoquants cannot cross one another.
II)An isoquant that is twice the distance from the origin represents twice the level of output.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 51

Use the following two statements to answer this question: I.If the marginal product of labor is zero,the total product of labor is at its maximum.
II If the marginal product of labor is at its maximum,the average product of labor is falling.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 52

A firm uses two factors of production.Irrespective of how much of each factor is used,both factors always have positive marginal products which imply that

A)isoquants are relevant only in the long run
B)isoquants have negative slope
C)isoquants are convex
D)isoquants can become vertical or horizontal
E)none of the above

Question 53

Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour,K is the number of coffee machines (capital),and L is the number of employees hired per hour (labor).The average product of labor and the marginal product of labor are both equal to AP = MP = 5K.Does labor exhibit diminishing marginal returns in this case?

A)Yes,if capital also exhibits diminishing marginal returns.
B)Yes,this is true for all values of K.
C)No,the marginal product of labor is constant (for a given K).
D)No,the marginal product of labor is increasing (for a given K).

Question 54

An important factor that contributes to labor productivity growth is:

A)growth in the capital stock.
B)technological change.
C)the standard of living.
D)A and B only
E)A,B,and C are correct.

Question 55

Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour,K is the number of coffee machines (capital),and L is the number of employees hired per hour (labor).What is the average product of labor?

A)AP = 5
B)AP = 5K
C)AP = 5L
D)AP = 5K/L

Question 56

Use the following statements to answer this question. I.The numerical labels attached to indifference curves are meaningful only in an ordinal way.
II)The numerical labels attached to isoquants are meaningful only in an ordinal way.

A)both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)both I and II are false.

Question 57

Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour,K is the number of coffee machines (capital),and L is the number of employees hired per hour (labor).What is the marginal product of labor?

A)MP = 5
B)MP = 5K
C)MP = 5L
D)MP = 5K/L

Question 58

The marginal rate of technical substitution is equal to the

A)slope of the total product curve.
B)change in output minus the change in labor.
C)change in output divided by the change in labor.
D)ratio of the marginal products of the inputs.

Question 59

You operate a car detailing business with a fixed amount of machinery (capital),but you have recently altered the number of workers that you employ per hour.As you increased the number of employees hired per hour from three to five,your total output increased by 5 cars to 15 cars per hour.What is the average product of labor at the new levels of labor?

A)AP = 3 cars per worker
B)AP = 5 cars per worker
C)AP = 4 cars per worker
D)We do not have enough information to answer this question.

Question 60

If the isoquants are straight lines,then

A)inputs have fixed costs at all use rates.
B)the marginal rate of technical substitution of inputs is constant.
C)only one combination of inputs is possible.
D)there are constant returns to scale.

Question 61

If the isoquants in an isoquant map are downward sloping but bowed away from the origin (i.e.,concave to the origin),then the production technology violates the assumption of:

A)technical efficiency.
B)free disposal.
C)diminishing marginal returns.
D)positive average product.

Question 62

An examination of the production isoquants in the diagram below reveals that:

A)capital and labor will be used in fixed proportions.
B)Capital and labor are perfectly substitutable.
C)the MRTS is constant.
D)Both B and C are correct.
E)none of the above

Question 63

The MRTS for isoquants in a fixed-proportion production function is:

A)zero or one.
B)always zero.
C)always one.
D)zero or undefined.

Question 64

Use the following two statements to answer this question: I."Decreasing returns to scale" and "diminishing returns to a factor of production" are two phrases that mean the same thing.
II Diminishing returns to all factors of production implies decreasing returns to scale.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 65

The diagram below shows an isoquant for the production of wheat. Which point has the highest marginal productivity of labor?

A)Point A
B)Point B
C)Point C
D)Point D

Question 66

A straight-line isoquant

A)is impossible.
B)would indicate that the firm could switch from one output to another costlessly.
C)would indicate that the firm could not switch from one output to another.
D)would indicate that capital and labor cannot be substituted for each other in production.
E)would indicate that capital and labor are perfect substitutes in production.

Question 67

According to the diagram below,where each isoquant's output level is marked to the right of the isoquant,production is characterized by

A)decreasing returns to scale.
B)constant returns to scale.
C)increasing returns to scale.
D)increasing,constant and decreasing returns to scale.

Question 68

Figure 6.2
Refer to Figure 6.2.The situation pictured is one of

A)constant returns to scale,because the line through the origin is linear.
B)decreasing returns to scale,because the isoquants are convex.
C)decreasing returns to scale,because doubling inputs results in less than double the amount of output.
D)increasing returns to scale,because the isoquants are convex.
E)increasing returns to scale,because doubling inputs results in more than double the amount of output.

Question 69

A firm's marginal product of labor is 4 and its marginal product of capital is 5.If the firm adds one unit of labor,but does not want its output quantity to change,the firm should

A)use five fewer units of capital.
B)use 0.8 fewer units of capital.
C)use 1.25 fewer units of capital.
D)add 1.25 units of capital.

Question 70

A production function in which the inputs are perfectly substitutable would have isoquants that are

A)convex to the origin.
B)L-shaped.
C)linear.
D)concave to the origin.

Question 71

A construction company builds roads with machinery (capital,K)and labor (L).If we plot the isoquants for the production function so that labor is on the horizontal axis,then a point on the isoquant with a small MRTS (in absolute value)is associated with high __________ use and low __________ use.

A)labor,capital
B)capital,labor
C)concrete,gravel
D)none of the above

Question 72

In a production process,all inputs are increased by 10%; but output increases less than 10%.This means that the firm experiences

A)decreasing returns to scale.
B)constant returns to scale.
C)increasing returns to scale.
D)negative returns to scale.

Question 73

An L-shaped isoquant

A)is impossible.
B)would indicate that the firm could switch from one output to another costlessly.
C)would indicate that the firm could not switch from one output to another.
D)would indicate that capital and labor cannot be substituted for each other in production.
E)would indicate that capital and labor are perfect substitutes in production.

Question 74

The marginal rate of technical substitution is equal to:

A)the absolute value of the slope of an isoquant.
B)the ratio of the marginal products of the inputs.
C)the ratio of the prices of the inputs.
D)all of the above
E)A and B only

Question 75

With increasing returns to scale,isoquants for unit increases in output become

A)farther and farther apart.
B)closer and closer together.
C)the same distance apart.
D)none of these.

Question 76

Which of the following is NOT related to the slope of isoquants?

A)The fact that inputs have positive marginal product
B)The fact that inputs have diminishing marginal product
C)The fact that input prices are positive
D)The fact that more of either input increases output
E)The fact that there are diminishing returns to inputs

Question 77

An examination of the production isoquants in the diagram below reveals that:

A)capital and labor must be used in fixed proportions.
B)capital and labor are perfectly substitutable.
C)except at the corners of the isoquants the MRTS is constant.
D)Both B and C are correct.
E)none of the above

Question 78

Which of the following examples represents a fixed-proportion production system with capital and labor inputs?

A)Clerical staff and computers
B)Airplanes and pilots
C)Horse-drawn carriages and carriage drivers
D)all of the above

Question 79

You are currently using three printing presses and five employees to print 100 sales manuals per hour.If the MRTS at this point is -0.5,then you would be willing to exchange __________ employees for two more printing presses in order to maintain current output.

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

Question 80

Increasing returns to scale in production means

A)more than 10% as much of all inputs are required to increase output 10%.
B)less than twice as much of all inputs are required to double output.
C)more than twice as much of only one input is required to double output.
D)isoquants must be linear.