Question 1

If PX = &#8364;60,000, MPX = 300 and MRQ = &#8364;250, the marginal revenue product of X equals:&#10;A)&#8364;75,000.&#10;B)300.&#10;C)&#8364;250.&#10;D)&#8364;60,000.

Accepted Answer

The formula for marginal revenue product (MRP) is MRP = MPX x MRQ. 
Substituting the given values, we get:
MRP = 300 x €250 = €75,000 
Therefore, the correct answer is A) €75,000. The formula for marginal revenue product is MPX x MRQ. So, MPX (300) x MRQ (€250) equals €75,000, which is the marginal revenue product of X. Therefore, choice A is the correct answer.

Question 2

When PX = &#8364;50, MPX = 5 and MPY = 2, relative employment levels are optimal provided:&#10;A)PY = &#8364;25.&#10;B)PY = &#8364;20.&#10;C)PY = &#8364;10.&#10;D)PY = &#8364;2.50.

Accepted Answer

To determine the optimal level of PY, we need to use the formula for the optimal ratio of MPX/MPY, which is MPX/MPY = PX/PY. Rearranging the formula, we get PY = PX/(MPX/MPY). Substituting the given values, we get PY = €50/(5/2) = €20. Therefore, the best choice is B. According to the optimal condition of relative employment levels, the ratio of the marginal product of labor in country X (MPX) to the marginal product of labor in country Y (MPY) should equal the ratio of the price of labor in country X (PX) to the price of labor in country Y (PY). In this case, PX/PY = 50/PY and MPX/MPY = 5/2. Solving for PY, we get PY = 20. Therefore, the best choice is B.

Question 3

Technical efficiency and optimal input proportions are found when:&#10;A)MPX/PY = MPY/PX.&#10;B)PX/PY = MPY/MPX.&#10;C)MRPX = MRPY.&#10;D)none of these.

Accepted Answer

D

Question 4

For a continuous total product function, average product equals the:&#10;A)inflection point of the total product curve.&#10;B)inflection point of the average product curve.&#10;C)slope of a line drawn from the origin to a point on the total product curve.&#10;D)slope of the total product curve.

Accepted Answer

The average product is calculated by dividing the total product by the quantity of the input used to produce this product. Graphically, this is represented by the slope of a line drawn from the origin to a particular point on the total product curve. This slope gives the average product of an input at that level of production.

Question 5

The law of diminishing returns implies that:&#10;A)a given percentage increase in all inputs leads to that same percentage increase in output.&#10;B)the proportional increase in output is larger than the underlying proportional increase in inputs.&#10;C)output increases at a rate less than the proportionate increase in inputs.&#10;D)none of these.

Accepted Answer

The answer of The law of diminishing returns implies that:&#10;A)a...

Question 6

The production function Q = -64X0.5Y0.4 exhibits:&#10;A)constant returns to scale.&#10;B)increasing returns to scale.&#10;C)diminishing returns to scale.&#10;D)increasing and then diminishing returns to scale.

Accepted Answer

The production function exhibits diminishing returns to scale because the exponents on both X and Y are less than 1, meaning that as both inputs are increased, the output will eventually increase at a decreasing rate. The production function exhibits diminishing returns to scale because as the inputs X and Y are increased proportionately, output Q increases at a decreasing rate.

Question 7

The marginal revenue product concept describes the:&#10;A)profit gained through expanding employment.&#10;B)breakeven profit level.&#10;C)added revenue from expanding employment.&#10;D)cost of expanding employment.

Accepted Answer

Marginal revenue product is the additional revenue a firm earns by hiring one additional unit of labor. So, the concept describes the added revenue from expanding employment. The marginal revenue product concept refers to the additional revenue a firm earns by adding one more unit of labor. It is calculated as the product of the marginal product of labor (the additional output gained by adding one more unit of labor) and the marginal revenue (the added revenue gained by producing and selling one more unit of output). Therefore, the correct answer is C, added revenue from expanding employment.

Question 8

Economic efficiency and optimal input use is found when:&#10;A)MPX/PY = MPY/PX.&#10;B)PX/PY = MPX/MPY.&#10;C)MRPX = MRPY.&#10;D)none of these.

Accepted Answer

The answer of Economic efficiency and optimal input use is...

Question 9

If PX = &#8364;75,000, MPX = 300 and MRQ = &#8364;250, the firm would like to:&#10;A)expand employment.&#10;B)neither expand nor shrink employment.&#10;C)shrink employment.&#10;D)none of these.

Accepted Answer

The answer of If PX = &#8364;75,000, MPX = 300...

Question 10

An irrational employment policy is indicated if the marginal product of a costly input is:&#10;A)positive.&#10;B)zero.&#10;C)less than the marginal product of Y.&#10;D)falling.

Accepted Answer

An irrational employment policy is indicated if the marginal product of a costly input is zero because it means the input is not contributing to output, yet incurs cost.

Deck 7: Production Analysis and Compensation Policy