Question 1

The law of diminishing marginal product shows the relationship
A) between accounting and economic profits.
B) between short-run and long-run outputs of a firm.
C) between inputs and outputs for a firm in the short run.
D) between inputs and outputs for a firm in the long run.

Accepted Answer

The law of diminishing marginal product relates to the short run output of the firm as it demonstrates the effects of adding more units of a variable input on output given a fixed level of other inputs. As more and more of the variable input is added, eventually the additional output generated by each additional unit of input will decrease, leading to diminishing marginal returns.

Question 2

The law of diminishing marginal product states that
A) output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors.
B) successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output.
C) a doubling all inputs will double output.
D) variable costs tend to decrease with output.

Accepted Answer

The law of diminishing marginal product states that successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output. As more and more workers are added to a fixed amount of capital, the marginal product of labor will eventually begin to decrease. This is due to factors such as overcrowding, diminishing returns to specialization, and finite resources.

Question 3

Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of
A) diminishing marginal product.
B) diminishing marginal utility.
C) diminishing marginal workforce.
D) diminishing marginal inputs.

Accepted Answer

This scenario describes diminishing marginal product, which occurs when adding more of a certain input (in this case, waiters) leads to a smaller increase in output (number of dinners served). As the manager adds more and more waiters, the extra help becomes less and less useful, and the waiters end up getting in each other's way and slowing things down.

Question 4

-Refer to the above table. At what quantity of labor does it become obvious that the law of diminishing marginal product has set in?
A) worker number 3
B) worker number 4
C) worker number 21
D) worker number 5

Accepted Answer

The answer of 
-Refer to the above table. At what...

Question 5

What is the law of diminishing marginal product? Is it a realistic concept for describing the real world? Explain.

Accepted Answer

The answer of What is the law of diminishing marginal...

Question 6

If marginal product is zero, we know that
A) total product is also zero.
B) average product is also zero.
C) total output is maximized.
D) average product is constant.

Accepted Answer

When marginal product is zero, it means that adding more of the variable input (e.g., labor) does not increase total output anymore, indicating that total output is at its maximum.

Question 7

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

Accepted Answer

The answer of Graphically, what does the marginal product curve...

Question 8

The law of diminishing marginal product is a statement
A) that concerns changes in variable input and changes in output.
B) that concerns the long run.
C) that concerns changes in profits.
D) that relates to plant size.

Accepted Answer

The law of diminishing marginal product states that as additional units of a variable input are added to a fixed input, after a certain point the marginal product of the variable input will decrease. This relates to changes in input and output, making choice A the most appropriate. The law does not concern the long run (choice B), changes in profits (choice C), or plant size (choice D).

Question 9

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

Accepted Answer

The answer of "Diminishing marginal product is a basic law...

Question 10

When total product is decreasing, marginal product is
A) positive and increasing.
B) positive and decreasing.
C) constant.
D) negative.

Accepted Answer

When total product is decreasing, it means that the additional output produced by each additional unit of input is less than the output produced by the previous unit of input. This indicates that the marginal product is negative.

Question 11

What is the law of diminishing marginal product?

Accepted Answer

The answer of What is the law of diminishing marginal...

Question 12

Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that
A) marginal product is increasing from workers 1-50 and then becomes negative after worker 51.
B) marginal product is increasing from workers 1-50, decreasing after 51 workers, and becomes negative after the 101st worker.
C) marginal product is decreasing from workers 1-101, becoming negative at the 102nd worker.
D) marginal product is increasing from workers 1-50, constant from workers 51 to 101, and is decreasing after that.

Accepted Answer

The increasing rate of total output curve from workers 1-50 indicates that marginal product is increasing during this range. The decreasing rate of total output curve from workers 51-101 indicates that marginal product is decreasing during this range. Beyond 101 workers, the total output curve decreases, indicating that marginal product is negative beyond the 101st worker. Therefore, choice B is the correct answer.

Question 13

-Refer to the above table. At what quantity of labor does the law of diminishing marginal product set in?
A) After 1 unit.
B) After 2 units.
C) After 3 units.
D) After 6 units.

Accepted Answer

The law of diminishing marginal product sets in after 2 units of labor, as the marginal product of labor decreases from 10 to 8.

Question 14

The point of saturation occurs when a firm
A) has total returns equal to zero.
B) first encounters negative marginal product.
C) first experiences positive marginal product.
D) maximizes its total returns.

Accepted Answer

The point of saturation occurs when a firm first encounters negative marginal product, which means that the additional input of a factor of production will result in a decrease in output. This signifies that the firm has reached its maximum output level with the current combination of input factors, and any further increase in input will result in lower output and higher costs. Therefore, option B - first encounters negative marginal product is the correct answer.

Question 15

Total product will start to decrease
A) at the quantity where the law of diminishing returns starts.
B) when average physical product decreases.
C) when marginal physical product increases.
D) when marginal physical product becomes negative.

Accepted Answer

Total product starts to decrease when the marginal physical product becomes negative, indicating that adding more units of a variable input to a fixed input actually reduces the total output.

Question 16

As long as marginal product of labor exceeds the average product of labor, then average product of labor
A) must fall.
B) must rise.
C) will stay unchanged.
D) will be at its maximum value.

Accepted Answer

If the marginal product of labor exceeds the average product of labor, it means that each additional unit of labor is adding more to the total output than the previous unit. This will cause the average product of labor to increase. Therefore, choice B is the best answer.

Question 17

-In the above table, the law of diminishing marginal product sets in after the ________ worker.
A) first
B) sixth
C) third
D) fourth

Accepted Answer

The answer of 
-In the above table, the law of...

Question 18

The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the
A) law of diminishing marginal product.
B) streamlining production function.
C) consumer equilibrium.
D) theory of increasing marginal utility.

Accepted Answer

The statement describes the law of diminishing marginal product, which states that as successive units of a variable factor of production are added to a fixed factor of production, the marginal product of the variable factor will eventually decrease. This is due to the fact that the fixed factor of production cannot be increased, resulting in a point where additional inputs will result in less and less additional output.

Question 19

What happens at a firm's point of saturation?
A) For the first time, hiring an additional worker decreases total product.
B) Workers cannot take on any additional tasks without working overtime hours.
C) The market for a firm's output has been saturated and sales fall to zero.
D) The firm's total costs exceed its revenues.

Accepted Answer

At a firm's point of saturation, adding an additional worker actually decreases the total product output. This indicates that the firm has reached its maximum production capacity and adding more workers is no longer efficient or productive.

Question 20

-Refer to the above table. At what quantity of labor is the average product of labor maximized?
A) 1 unit.
B) 2 units.
C) 3 units.
D) 6 units.

Accepted Answer

The average product of labor is maximized when the total output per unit of labor is at its highest. Without the specific table data, the general approach to find this is to calculate the average product of labor (total output divided by the number of labor units) for each given option and identify where it peaks. Assuming the correct answer is provided as C (3 units), this would mean at 3 units of labor, the average product of labor is at its highest point compared to the other options given.

Quiz 22: The Firm: Cost and Output Determination

The law of diminishing marginal product shows the relationship

The law of diminishing marginal product states that

Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of

-Refer to the above table. At what quantity of labor does it become obvious that the law of diminishing marginal product has set in?

What is the law of diminishing marginal product? Is it a realistic concept for describing the real world? Explain.

If marginal product is zero, we know that

Graphically, what does the marginal product curve for a labor input look like? Explain in words.

The law of diminishing marginal product is a statement

"Diminishing marginal product is a basic law because new workers are always less qualified than the existing workers." Do you agree or disagree? Explain.

When total product is decreasing, marginal product is

What is the law of diminishing marginal product?

Suppose the total output curve increases at an increasing rate for workers 1-50, increases at a decreasing rate from workers 51-101, and decreases beyond 101 workers. We would know that

-Refer to the above table. At what quantity of labor does the law of diminishing marginal product set in?

The point of saturation occurs when a firm

Total product will start to decrease

As long as marginal product of labor exceeds the average product of labor, then average product of labor

-In the above table, the law of diminishing marginal product sets in after the ________ worker.

The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the

What happens at a firm's point of saturation?

-Refer to the above table. At what quantity of labor is the average product of labor maximized?