Question 1

Factors of production such as labor and capital
A) are complementary.
B) are substitutable.
C) can be complements and also substitutes.
D) can be neither complements nor substitutes.

Accepted Answer

Factors of production like labor and capital can be complements in some contexts (where the use of one increases the productivity of the other) and substitutes in others (where one can be used in place of the other).

Question 2

A production function shows the greatest amount that a firm will produce given the amount of labor input.

Accepted Answer

The answer of A production function shows the greatest amount...

Question 3

If the first worker produces ten custom picture frames a day, and the second worker produces twelve additional custom picture frames a day, then diminishing marginal returns have not yet set in.

Accepted Answer

Diminishing marginal returns occur when the additional output from each additional unit of input decreases. Since the second worker is producing more frames per day than the first worker, there are no diminishing marginal returns yet.

Question 4

A firm's isocost line shifts parallel inward from the original isocost line as its
A) total cost for capital and labor increases.
B) total cost for capital and labor decreases.
C) total cost for capital increases and its total cost for labor decreases.
D) total cost for capital decreases and its total cost for labor increases.

Accepted Answer

An isocost line represents all combinations of capital and labor that a firm can purchase for a given total cost. If the isocost line shifts parallel inward, it means the firm has less money to spend on capital and labor, indicating a decrease in total cost for capital and labor.

Question 5

When the marginal product of labor ________ the average product of labor, then the average product is maximized.
A) equals
B) is greater than
C) is less than
D) The average product of labor is never maximized.

Accepted Answer

When the marginal product of labor equals the average product of labor, it means that each additional unit of labor is adding the same amount of output as the previous unit, which ensures that the average product is maximized. If the marginal product is greater than the average product, then adding additional labor will increase the average product, and if the marginal product is less than the average product, then adding additional labor will decrease the average product. Therefore, option A) is the correct answer.

Question 6

Costs of production are determined
A) only by the technologies that are available.
B) only by the input prices that are available.
C) by the technologies that are available and by input prices.
D) by the technologies that are available and by the demand for the output.

Accepted Answer

The costs of production are determined by the combination of the technologies that are available and the input prices. The technology determines the efficiency of the production process while the input prices determine the cost of the inputs used in production. Therefore, both factors are important in determining the costs of production. The demand for the output does not directly determine the costs of production but can influence the level of output produced which in turn affects the costs of production.

Question 7

The additional output that can be produced by adding one additional unit of a specific input is called marginal product.

Accepted Answer

This statement is true. Marginal product is the additional output that can be produced by adding one more unit of a specific input, while holding all other inputs constant.

Question 8

Related to the Economics in Practice on page 150: For pineapple farmers in Ghana, the choice of how much fertilizer to use was highly dependant on social learning, where the farmers based their decisions on
A) the amount of fertilizer they used for their previously-grown maize crops.
B) the amount of fertilizer they were given by the government.
C) how much fertilizer their more successful neighbor farmers used.
D) the expected value of their future pineapple crops.

Accepted Answer

The article states that pineapple farmers in Ghana based their choices on "the amount of fertilizer their more successful neighbor farmers used." This demonstrates that their decision-making was highly influenced by social learning from their peers.

Question 9

The formula q/L represents
A) total product.
B) the average product of labor.
C) the capital-to-labor ratio.
D) the marginal product of labor.

Accepted Answer

The formula Δq/ΔL represents the change in output (q) resulting from a change in the amount of labor (L) used, which is the definition of the marginal product of labor.

Question 10

Hannah's House of Hotcakes serves 30 customers in an hour when it hires one worker. It serves 60 customers in an hour when it hires two workers. The marginal product of the second worker is ________ customers served per hour.
A) 20
B) 30
C) 50
D) 67.5

Accepted Answer

The marginal product of labor is the additional output from adding one extra unit of labor. In this case, we can calculate the marginal product of the second worker by taking the difference in output (customers served) between the two scenarios where 1 worker and 2 workers are hired.

Marginal product of second worker = Output with 2 workers - Output with 1 worker
Marginal product of second worker = 60 customers/hour - 30 customers/hour
Marginal product of second worker = 30 customers/hour

Therefore, the marginal product of the second worker is 30 customers served per hour. The correct answer is B.

Question 11

A production function shows the least amount that a firm will produce given the amount of labor input.

Accepted Answer

A production function shows the maximum amount of output that a firm can produce with a given amount of inputs, not the least amount.

Question 12

Related to the Economics in Practice on page 151: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?
A) They should drive as quickly as possible in order to make more deliveries per day.
B) They should drive at the most fuel-efficient rate in order to reduce fuel consumption costs.
C) They should balance the concerns of speed and fuel efficiency and drive at a speed that minimizes total expenses.
D) They should drive as close to the legal speed limit as possible.

Accepted Answer

The best analysis is to balance the concerns of speed and fuel efficiency to minimize total expenses. This takes into account both the number of deliveries and the cost of fuel consumption. It is not always beneficial to drive as quickly as possible, as this may increase fuel costs and also risk accidents or damage to the truck or its contents. Similarly, driving at the most fuel-efficient rate may not always be the best option if it means sacrificing too much delivery time. Therefore, a balance must be struck between these factors to find the optimal speed for minimizing the total expenses.

Question 13

Related to the Economics in Practice on page 151: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?
A) an increase in the hourly wage of truck drivers and a decrease in the cost of gasoline
B) an increase in the hourly wage of truck drivers and an increase in the cost of gasoline
C) a decrease in the hourly wage of truck drivers and a decrease in the cost of gasoline
D) a decrease in the hourly wage of truck drivers and an increase in the cost of gasoline

Accepted Answer

An increase in the hourly wage of truck drivers incentivizes faster delivery to reduce labor costs, while a decrease in gasoline costs makes driving faster less expensive.

Question 14

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

Accepted Answer

Since the second worker is also able to produce five additional frames a day, it means that the input (workers) and output (picture frames) are in a linear relationship without diminishing marginal returns.

Question 15

A firm's isocost line shifts parallel outward from the original isocost line as its
A) total cost for capital and labor increases.
B) total cost for capital and labor decreases.
C) total cost for capital increases and its total cost for labor decreases.
D) total cost for capital decreases and its total cost for labor increases.

Accepted Answer

When a firm's total cost for both capital and labor increases, it will need to spend more money to produce the same level of output. This means that the firm will need to shift its isocost line parallel outward to maintain the same level of output.

Question 16

Assume the total product of two workers is 160 and the total product of three workers is 180. The three worker's average product is ________ while the third worker's marginal product is ________.
A) 20; 60
B) 60; 20
C) 20; 26.67
D) 320; 540

Accepted Answer

The average product for three workers is the total product divided by the number of workers, which is 180/3 = 60. The marginal product of the third worker is the change in total product when the third worker is added, which is 180 - 160 = 20.

Question 17

One worker produces 5 rocking chairs. To produce 10 rocking chairs it will be necessary to hire more than two workers, if diminishing returns have set in.

Accepted Answer

Diminishing returns means that each additional unit of input (e.g. hiring an additional worker) results in a smaller increase in output. Therefore, it is likely that hiring a third worker will not result in double the output (10 rocking chairs), but rather slightly less than double.

Question 18

Assume the total product of three workers is 60 and the total product of four workers is 80. The four worker's average product is ________ while the fourth worker's marginal product is ________.
A) 5; 15
B) 15; 5
C) 20; 20
D) 80; 20

Accepted Answer

The answer of Assume the total product of three workers...

Question 19

If the marginal product of labor is less than the average product of labor, then the average product of labor is increasing.

Accepted Answer

If the marginal product of labor is less than the average product of labor, it means that the additional unit of labor is producing less output than the average worker. This would bring down the average product of labor, and hence it would be decreasing, not increasing.

Question 20

One worker produces 10 rocking chairs. If diminishing returns have already set in, a firm will need to hire more than two workers to produce 20 rocking chairs.

Accepted Answer

Diminishing returns refer to the point at which adding more workers does not result in a proportional increase in output. Therefore, if diminishing returns have already set in, it is likely that hiring a third worker will not result in a double output of 20 rocking chairs, meaning the firm would need to hire more than two workers to achieve this level of production.

Quiz 7: The Production Process: the Behavior of Profit-Maximizing Firms

Factors of production such as labor and capital

A production function shows the greatest amount that a firm will produce given the amount of labor input.

If the first worker produces ten custom picture frames a day, and the second worker produces twelve additional custom picture frames a day, then diminishing marginal returns have not yet set in.

A firm's isocost line shifts parallel inward from the original isocost line as its

When the marginal product of labor ________ the average product of labor, then the average product is maximized.

Costs of production are determined

The additional output that can be produced by adding one additional unit of a specific input is called marginal product.

Related to the Economics in Practice on page 150: For pineapple farmers in Ghana, the choice of how much fertilizer to use was highly dependant on social learning, where the farmers based their decisions on

The formula q/L represents

Hannah's House of Hotcakes serves 30 customers in an hour when it hires one worker. It serves 60 customers in an hour when it hires two workers. The marginal product of the second worker is ________ customers served per hour.

A production function shows the least amount that a firm will produce given the amount of labor input.

Related to the Economics in Practice on page 151: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?

Related to the Economics in Practice on page 151: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

A firm's isocost line shifts parallel outward from the original isocost line as its

Assume the total product of two workers is 160 and the total product of three workers is 180. The three worker's average product is while the third worker's marginal product is .

One worker produces 5 rocking chairs. To produce 10 rocking chairs it will be necessary to hire more than two workers, if diminishing returns have set in.

Assume the total product of three workers is 60 and the total product of four workers is 80. The four worker's average product is while the fourth worker's marginal product is .

If the marginal product of labor is less than the average product of labor, then the average product of labor is increasing.

One worker produces 10 rocking chairs. If diminishing returns have already set in, a firm will need to hire more than two workers to produce 20 rocking chairs.