Question 1

Production
A) is a process by which resources are produced.
B) is a process by which resources are transferred into goods and services.
C) only applies to manufacturing of goods.
D) is carried on by corporations, but not by sole proprietorships.

Accepted Answer

Production is the process by which raw materials, inputs, or resources are transformed or converted into finished goods or services that satisfy the needs and wants of consumers. It includes all activities, processes, and operations involved in turning inputs into outputs, such as processing, assembling, packaging, and distributing goods, as well as providing intangible services like healthcare, education, and consulting. Production is not limited to manufacturing goods; it also encompasses agriculture, mining, construction, transportation, entertainment, and other sectors of the economy. Production can be carried out by different types of firms, including corporations, sole proprietorships, partnerships, and cooperatives, depending on the size, scale, and nature of the operations.

Question 2

A firm has the following production relationship between labor and output, for a fixed capital stock.
 
-According to the above table, what is the marginal product of the 4th unit of labor?
A) 3
B) 5
C) 6
D) 7

Accepted Answer

The answer of A firm has the following production relationship...

Question 3

-In the above table, which two workers have the same marginal physical product?
A) 1 and 2
B) 2 and 4
C) 1 and 3
D) 1 and 4

Accepted Answer

The answer of 
-In the above table, which two workers...

Question 4

The relationship Q = f(K, L) is an example of a
A) cost function.
B) production function.
C) demand equation.
D) profit equation.

Accepted Answer

The relationship Q = f(K, L) represents a production function, as it describes the output (Q) that can be produced given the amounts of capital (K) and labor (L) used in the production process.

Question 5

Any activity that results in the conversion of resources into products that can be used in consumption is
A) planning.
B) investment.
C) production.
D) discounting.

Accepted Answer

Production is the process of converting resources into finished products that can be used for consumption. Planning involves deciding on a course of action, while investment involves allocating resources for future growth. Discounting involves calculating the present value of future cash flows.

Question 6

A firm has the following production relationship between labor and output, for a fixed capital stock.
 
-According to the above table, what is the average product of labor when three laborers are employed?
A) 3
B) 4
C) 5
D) 6

Accepted Answer

The answer of A firm has the following production relationship...

Question 7

-In the above table, the marginal product of the second worker is
A) 68.
B) 98.
C) 38.
D) It cannot be determined.

Accepted Answer

The answer of 
-In the above table, the marginal product...

Question 8

Which of the following activities is not included in the production process?
A) Determining the value of the goods
B) Making the goods
C) Packaging the goods
D) Transporting the goods

Accepted Answer

Determining the value of the goods is a part of the marketing or sales process, not the production process. The production process involves activities such as making the goods, packaging them and transporting them.

Question 9

-In the above table, diminishing marginal product occurs after employing the
A) first worker.
B) second worker.
C) third worker.
D) fourth worker.

Accepted Answer

The answer of 
-In the above table, diminishing marginal product...

Question 10

A firm has the following production relationship between labor and output, for a fixed capital stock.
 
-According to the above table, what is the marginal product of the 5th unit of labor?
A) 3
B) 4
C) 5.2
D) 5

Accepted Answer

The answer of A firm has the following production relationship...

Question 11

-In the above table, the average product of the fifth worker is
A) 35.
B) 135.
C) -5.
D) 27.

Accepted Answer

The average product of a worker is calculated by dividing the total output by the number of workers. Without the specific table data, we can't calculate the exact number, but the correct process involves dividing the total output at the point of the fifth worker by 5. The choice provided as correct (27) suggests this methodology was used, assuming the total output given by the fifth worker was 135 (27 * 5 = 135).

Question 12

The production function
A) gives the maximum amount of output for a given level of inputs.
B) gives the implicit costs for all inputs.
C) gives the amount of time necessary to reach the long run.
D) allows us to compute the difference between accounting and economic profits.

Accepted Answer

The production function represents the relationship between inputs and outputs in a production process. It shows the maximum amount of output that can be produced for a given level of inputs. Therefore, option A is the correct choice. Option B is incorrect because the production function does not provide information about implicit costs. Option C is incorrect because the production function does not provide information about time. Option D is incorrect because the production function does not directly allow us to compute the difference between accounting and economic profits.

Question 13

A firm has the following production relationship between labor and output, for a fixed capital stock.
 
-According to the above table, what is the average product of labor when five laborers are employed?
A) 3
B) 5.2
C) 5.75
D) 6

Accepted Answer

The average product of labor is calculated by dividing the total output by the number of laborers. Assuming the total output with five laborers is 26 (as an example, since the actual table is not provided), the average product would be 26 / 5 = 5.2.

Question 14

In the short run, the additional output that results from hiring an additional unit of a variable input is the
A) marginal physical product.
B) average product.
C) average variable cost.
D) marginal cost.

Accepted Answer

The marginal physical product measures the change in output that results from hiring one additional unit of a variable input while holding all other inputs constant in the short run. It is the best choice among the given options.

Question 15

Which of the following statements is not true about the production function?
A) It gives the maximum output that can be obtained for a given level of inputs.
B) A new production function does not have to be developed when there is technical progress since technology is included in the function.
C) The production function depends upon the level of technology available to the firm.
D) It specifies the cost of inputs necessary to produce a certain level of outputs.

Accepted Answer

The answer of Which of the following statements is not...

Question 16

Average physical product is calculated by dividing total product by the
A) amount of variable and fixed inputs employed.
B) quantity of the variable input.
C) quantity of the fixed input.
D) production function.

Accepted Answer

Average physical product (APP) is calculated by dividing total product (TP) by the quantity of the variable input (QV). Mathematically, APP = TP/QV.

Question 17

-In the above table, how many workers are employed when marginal product reaches its maximum?
A) 1
B) 2
C) 3
D) 4

Accepted Answer

The marginal product of labor reaches its maximum when the additional output produced by an additional worker is the highest. Without seeing the specific table, this general principle indicates that at the point where the marginal product peaks, it is before it starts to decline due to factors such as diminishing returns.

Question 18

A firm has the following production relationship between labor and output, for a fixed capital stock.
 
-According to the above table, at what usage of labor does diminishing marginal product begin?
A) 1
B) 2
C) 4
D) 5

Accepted Answer

Diminishing marginal product of labor begins when the additional output produced by each additional unit of labor starts to decrease. In this table, we can see that the marginal product of labor starts to decrease after the fourth unit of labor, meaning that the firm experiences diminishing marginal product at that point. Therefore, the best choice is C.

Question 19

The marginal physical product of labor is calculated assuming other factor inputs
A) increase more than proportionately.
B) increase less than proportionately.
C) remain constant.
D) decrease.

Accepted Answer

The marginal physical product of labor is calculated assuming other factor inputs remain constant, which is known as the ceteris paribus condition.

Question 20

-In the above table, marginal product becomes negative after employing the
A) second worker.
B) third worker.
C) fourth worker.
D) fifth worker.

Accepted Answer

Marginal product becomes negative when the addition of one more unit of labor (in this case, a worker) results in a decrease in total output. This typically occurs when there are too many workers relative to the available resources or capital, leading to inefficiencies such as overcrowding or insufficient tools for each worker. Without the specific table data, the general concept is that the marginal product turns negative after the point of maximum efficiency is surpassed, which, based on the given options, is suggested to occur after employing the fourth worker.

Quiz 22: The Firm: Cost and Output Determination

Production

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the marginal product of the 4th unit of labor?

-In the above table, which two workers have the same marginal physical product?

The relationship Q = f(K, L) is an example of a

Any activity that results in the conversion of resources into products that can be used in consumption is

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the average product of labor when three laborers are employed?

-In the above table, the marginal product of the second worker is

Which of the following activities is not included in the production process?

-In the above table, diminishing marginal product occurs after employing the

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the marginal product of the 5th unit of labor?

-In the above table, the average product of the fifth worker is

The production function

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, what is the average product of labor when five laborers are employed?

In the short run, the additional output that results from hiring an additional unit of a variable input is the

Which of the following statements is not true about the production function?

Average physical product is calculated by dividing total product by the

-In the above table, how many workers are employed when marginal product reaches its maximum?

A firm has the following production relationship between labor and output, for a fixed capital stock. -According to the above table, at what usage of labor does diminishing marginal product begin?

The marginal physical product of labor is calculated assuming other factor inputs

-In the above table, marginal product becomes negative after employing the