Question 1

Use the information provided in Table 7.4 below to answer the question(s) that follow.
Table 7.4
Inputs Required to Produce a Product Using Alternative Technologies
 $$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units d Capital } & \begin{array} { l } 
\text { Number of } \
\text { Employees }
\end{array} \
\hline \text { A } & 8 & 36 \
\hline \text { B } & 12 & 24 \
\hline \text { C } & 16 & 16 \
\hline \text { D } & 24 & 12 \
\hline
\end{array}$$
-Refer to Table 7.4. If the hourly price of capital is $20 and the hourly wage rate is $14, which production technology should be selected?
A) A
B) B
C) C
D) D

Accepted Answer

Technology C requires the lowest total cost of production, which is $448 per hour.

Question 2

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, its isocost line
A) shifts out parallel to the original isocost line.
B) shifts in parallel to the original isocost line.
C) rotates outward on the Y-intercept.
D) rotates outward on the X-intercept.

Accepted Answer

Isocost lines represent combinations of capital and labor that a firm can purchase for a given total cost. If a firm's expenditures for capital and labor decrease, it means the firm has a lower total cost to spend on these inputs. Therefore, the isocost line shifts inward (or towards the origin) parallel to the original line, indicating that the firm can now afford fewer combinations of capital and labor at the new, lower level of expenditure.

Question 3

Use the information provided in Table 7.4 below to answer the question(s) that follow.
Table 7.4
Inputs Required to Produce a Product Using Alternative Technologies
 $$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units d Capital } & \begin{array} { l } 
\text { Number of } \
\text { Employees }
\end{array} \
\hline \text { A } & 8 & 36 \
\hline \text { B } & 12 & 24 \
\hline \text { C } & 16 & 16 \
\hline \text { D } & 24 & 12 \
\hline
\end{array}$$
-Refer to Table 7.4. If the hourly price of capital is $40 and the hourly wage rate is $10, which production technology should be selected?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Use the information provided in Table 7.4...

Question 4

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is ________, and the marginal product of the third worker is ________.
A) 40; 10
B) 50; 20
C) 13.33; 6.67
D) 120; 100

Accepted Answer

The average product of three workers is the total product divided by the number of workers, which is 150/3 = 50. The marginal product of the third worker is the increase in total product from adding the third worker, which is 150 - 130 = 20.

Question 5

If the marginal product of labor equals the average product of labor, then the
A) average product is maximized.
B) marginal product is maximized.
C) marginal product is still increasing.
D) average product is still increasing.

Accepted Answer

When the marginal product of labor equals the average product of labor, it indicates that the average product is maximized. This is because the average product of labor increases as long as the marginal product is above it and starts to decrease once the marginal product falls below the average product.

Question 6

What is the formula for the average product of labor?
A) Δq/ΔL
B) ΔL/Δq
C) q/L
D) L/q

Accepted Answer

The average product of labor is calculated by dividing the total output (q) by the number of units of labor (L) used to produce that output, hence the formula is q/L.

Question 7

Use the information provided in Table 7.4 below to answer the question(s) that follow.
Table 7.4
Inputs Required to Produce a Product Using Alternative Technologies
 $$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units d Capital } & \begin{array} { l } 
\text { Number of } \
\text { Employees }
\end{array} \
\hline \text { A } & 8 & 36 \
\hline \text { B } & 12 & 24 \
\hline \text { C } & 16 & 16 \
\hline \text { D } & 24 & 12 \
\hline
\end{array}$$
-Refer to Table 7.4. Which technology is the most capital intensive?
A) A
B) B
C) C
D) D

Accepted Answer

Technology D is the most capital intensive as it requires the highest units of capital (24 units) to produce the product.

Question 8

Firms in an economy with high labor costs have an incentive to use more ________ techniques.
A) labor-intensive
B) capital-intensive
C) capital-saving
D) labor-dependent

Accepted Answer

Firms in economies with high labor costs are incentivized to use more capital-intensive techniques to reduce reliance on expensive labor, thereby lowering costs.

Question 9

Related to the Economics in Practice on page 154: According to the Economics in Practice feature, the managerial part of the United States Technical Assistance and Productivity Program
A) generated large and long-lasting positive effects.
B) generated large short-term effects but barely any long-lasting effects.
C) generated only small positive effects in both the short and long run.
D) was not effective in either the long run or the short run.

Accepted Answer

The Economics in Practice feature on page 154 states that the managerial part of the United States Technical Assistance and Productivity Program "generated large and long-lasting positive effects."

Question 10

Assume the total product of two workers is 80 and the total product of three workers is 90. The average product of three workers is ________, and the marginal product of the third worker is ________.
A) 10; 45
B) 30; 10
C) 10; 13.33
D) 160; 270

Accepted Answer

The average product of three workers is the total product divided by the number of workers, which is 90/3 = 30. The marginal product of the third worker is the change in total product from adding the third worker, which is 90 - 80 = 10.

Question 11

Use the information provided in Table 7.4 below to answer the question(s) that follow.
Table 7.4
Inputs Required to Produce a Product Using Alternative Technologies
 $$\begin{array} { c c c } 
\hline \text { Technology } & \text { Units d Capital } & \begin{array} { l } 
\text { Number of } \
\text { Employees }
\end{array} \
\hline \text { A } & 8 & 36 \
\hline \text { B } & 12 & 24 \
\hline \text { C } & 16 & 16 \
\hline \text { D } & 24 & 12 \
\hline
\end{array}$$
-Refer to Table 7.4. Which technology is the most labor intensive?
A) A
B) B
C) C
D) D

Accepted Answer

Technology A is the most labor intensive because it requires the highest number of employees (36) compared to the other technologies.

Question 12

Assume the total product of two workers is 100 and the total product of three workers is 120. The average product of three workers is ________, and the marginal product of the third worker is ________.
A) 40; 20
B) 20; 100
C) 13.33; 6.67
D) 120; 100

Accepted Answer

The average product of three workers is the total product divided by the number of workers, which is 120/3 = 40. The marginal product of the third worker is the increase in total product from adding the third worker, which is 120 - 100 = 20.

Question 13

The quantitative relationship between inputs and outputs is called
A) consumer technology.
B) labor-intensive technology.
C) capital-intensive technology.
D) production technology.

Accepted Answer

Production technology refers to the quantitative relationship between inputs (such as labor, materials, and capital) and outputs (goods or services produced). It encompasses the methods, processes, and techniques used to produce goods and services efficiently.

Question 14

Refer to Scenario 7.8 below to answer the question(s) that follow.
SCENARIO 7.8: A swimming pool cleaning company has the following production possibilities. With one, two, three, and four workers, the company can clean 5, 12, 17, and 20 pools per day, respectively.
-Refer to Scenario 7.8. The marginal product of the third worker is
A) 4.
B) 5.
C) 12.
D) 17.

Accepted Answer

The marginal product of the third worker is calculated by subtracting the total product with two workers from the total product with three workers. This gives us 17 pools (with three workers) - 12 pools (with two workers) = 5 pools.

Question 15

When Burning Bob's Salsa House hires one worker, 30 customers can be served in an hour. When Burning Bob's Salsa House hires two workers, 50 customers can be served in an hour. 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 the second worker is the additional output produced by the second worker, which is calculated by subtracting the total output with one worker from the total output with two workers. Therefore, it is 50 customers - 30 customers = 20 customers served per hour.

Question 16

Firms in an economy with high capital costs have an incentive to use more ________ techniques.
A) labor-intensive
B) capital-intensive
C) labor-saving
D) capital-dependent

Accepted Answer

High capital costs make capital more expensive relative to labor, incentivizing firms to use more labor-intensive techniques to minimize costs.

Question 17

The formula for the marginal product of labor is
A) L/q.
B) (ΔL)(Δq).
C) q/L.
D) Δq/ΔL.

Accepted Answer

The marginal product of labor is calculated as the change in output (Δq) divided by the change in labor (ΔL), which is represented by the formula Δq/ΔL.

Question 18

Assume the total product of three workers is 120 and the total product of four workers is 160. The average product of four workers is ________, and the marginal product of the fourth worker is ________.
A) 10; 40
B) 30; 10
C) 40; 40
D) 160; 40

Accepted Answer

The average product of four workers is calculated by dividing the total product by the number of workers, which is 160/4 = 40. The marginal product of the fourth worker is the additional output from adding the fourth worker, calculated by subtracting the total product of three workers from the total product of four workers, which is 160 - 120 = 40.

Question 19

Refer to Scenario 7.8 below to answer the question(s) that follow.
SCENARIO 7.8: A swimming pool cleaning company has the following production possibilities. With one, two, three, and four workers, the company can clean 5, 12, 17, and 20 pools per day, respectively.
-Refer to Scenario 7.8. The marginal product of the second worker is
A) 3.
B) 5.
C) 7.
D) 12.

Accepted Answer

The marginal product of the second worker is calculated by subtracting the total product with one worker from the total product with two workers, which is 12 pools - 5 pools = 7 pools.

Question 20

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor increase, its isocost line
A) shifts out parallel to the original isocost line.
B) shifts in parallel to the original isocost line.
C) rotates outward on the Y-intercept.
D) rotates outward on the X-intercept.

Accepted Answer

When a firm's expenditures for capital and labor increase without a change in the relative prices of capital and labor, its isocost line shifts outward in a parallel manner. This is because the firm can now afford more of both inputs at the same price ratio, indicating an increase in total expenditure while maintaining the same slope (price ratio).

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

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor decrease, its isocost line

Assume the total product of two workers is 130 and the total product of three workers is 150. The average product of three workers is , and the marginal product of the third worker is .

If the marginal product of labor equals the average product of labor, then the

What is the formula for the average product of labor?

Firms in an economy with high labor costs have an incentive to use more ________ techniques.

Related to the Economics in Practice on page 154: According to the Economics in Practice feature, the managerial part of the United States Technical Assistance and Productivity Program

Assume the total product of two workers is 80 and the total product of three workers is 90. The average product of three workers is , and the marginal product of the third worker is .

Assume the total product of two workers is 100 and the total product of three workers is 120. The average product of three workers is , and the marginal product of the third worker is .

The quantitative relationship between inputs and outputs is called

When Burning Bob's Salsa House hires one worker, 30 customers can be served in an hour. When Burning Bob's Salsa House hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is ________ customers served per hour.

Firms in an economy with high capital costs have an incentive to use more ________ techniques.

The formula for the marginal product of labor is

Assume the total product of three workers is 120 and the total product of four workers is 160. The average product of four workers is , and the marginal product of the fourth worker is .

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor increase, its isocost line