Question 1

The law of diminishing returns to an input says that if other inputs are fixed
A)output eventually will decrease with increases of the variable input.
B)change in output will eventually decrease with increases in the variable input.
C)revenue will eventually decrease with increases in the variable input.
D)the variable input will eventually decrease with more output.

Accepted Answer

The law of diminishing returns to an input states that as we increase the quantity of one input while keeping all other inputs constant, the resulting increase in output will eventually decrease. Therefore, the change in output will eventually decrease with increases in the variable input, which is option B.

Question 2

If equal amounts of a variable input are sequentially added to the fixed input in a typical production function,
A)the increments to output will decrease first and then increase.
B)the additions to output will be constant.
C)increments to output will increase indefinitely.
D)increments to output will first increase at an increasing rate and then at a decreasing rate.

Accepted Answer

The law of diminishing marginal returns states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. Therefore, in a typical production function where equal amounts of a variable input are added sequentially to the fixed input, the increments to output will first increase at an increasing rate (as the variable input is efficiently utilized), and then at a decreasing rate (as the marginal returns of the variable input start to diminish).

Question 3

In a typical production function, the relevant factors of production are land, labor, capital, and
A)raw materials.
B)technology.
C)entrepreneurship.
D)resources.

Accepted Answer

The relevant factors of production in a typical production function are land, labor, and capital. However, entrepreneurship is also recognized as a distinct factor, as it involves the ability to combine or innovate the other factors of production to create value. Therefore, the correct answer is (C) entrepreneurship.

Question 4

The nineteenth-century British economist Thomas Malthus argued that the law of diminishing returns implied that
A)capital would increase relative to labor.
B)technological change would grow at an increasing pace.
C)eventual misery would befall the human race.
D)raw materials would eventually run out.

Accepted Answer

Malthus believed that as population grew, resources would become increasingly scarce and eventually lead to misery and even population collapse. This idea became known as the "Malthusian trap" or the "Malthusian catastrophe." Diminishing returns refer to the idea that as more and more resources are added to a fixed amount of land or labor, the additional output gained from each additional unit of resources will eventually decrease, ultimately leading to lower productivity and economic decline.

Question 5

The average product of a variable input
A)decreases at an increasing rate.
B)constantly rises over the relevant range of production.
C)is the change in the total product that occurs when the variable input increases one unit.
D)is defined as the total product divided by the quantity of the variable input.

Accepted Answer

The average product of a variable input is defined as the total product divided by the quantity of the variable input. It measures the output per unit of input and gives an indication of the efficiency with which the input is being used. It does not necessarily increase or decrease at a constant rate, as this will depend on the production function and the level of output.

Question 6

The short run is defined as that period of time during which
A)one or more inputs cannot be freely varied.
B)all inputs are variable.
C)all inputs are fixed.
D)labor is counted as a fixed input.

Accepted Answer

In the short run, at least one input is considered fixed and cannot be freely varied. While other inputs can be adjusted, there is a limit to the change that can be made to the fixed input. Therefore, option (A) is the correct answer. Option (B) is incorrect as it suggests that all inputs can be varied, which is not true for the short run. Option (C) is incorrect as it suggests that all inputs are fixed, which is not true for the short run. Option (D) is only partially correct as it is true that labor is often considered a fixed input in the short run, but it does not provide a complete definition of the short run.

Question 7

In a short-run production function before diminishing returns set in, both MPL and APL will have
A)positive slopes and MPL will lie above APL.
B)positive slopes and APL will lie above MPL.
C)negative slopes and MPL will lie above APL.
D)negative slopes and APL will lie above MPL.

Accepted Answer

Before diminishing returns set in, both MPL (marginal product of labor) and APL (average product of labor) will have positive slopes, indicating that additional units of labor are adding to the total output and average output per worker, respectively. MPL will lie above APL because it measures the additional output produced by one more unit of labor, while APL measures the total output divided by the number of workers. Since MPL measures the productivity of an additional unit of labor, it will be higher than APL until diminishing returns set in.

Question 8

When Thomas Malthus argued that the prospects for human flourishing were gloomy and that starvation would eventually become the normal human condition, he was assuming that
A)diseconomies of scale will become more commonplace.
B)diminishing returns to production will become more apparent.
C)epidemics will overpower the many technological advances that he expected.
D)self-interest will become more intense and religion will cease to be an influential force in society.

Accepted Answer

Malthus believed that population growth would outstrip food production, leading to diminishing returns to production. He did not mention diseconomies of scale or epidemics, and while he thought that self-interest was a powerful force, he did not suggest that religion would disappear.

Question 9

If capital and labor are perfect substitutes in a production function, the isoquants for this function will be
A)concave from above.
B)convex from above.
C)a straight line.
D)any one of these depending on the particular combination of labor and capital employed.

Accepted Answer

If capital and labor are perfect substitutes, they can be used in any proportion to produce the same output level. Therefore, the isoquants will be linear or straight lines, indicating that the same level of output can be produced using any combination of capital and labor, as long as the ratio of input use is maintained. The answer is not D because isoquants for perfect substitutes have identical slopes, which means that they are parallel to each other and not dependent on any specific input combination.

Question 10

Geometrically, the marginal product
A)is the slope of the line joining the origin to the corresponding point on the total product curve.
B)at any point is the slope of the total product curve at that point.
C)is that point at which the total product curve exhibits diminishing returns.
D)is the slope of the average product curve.

Accepted Answer

Marginal product is defined as the additional output produced by adding one more unit of input. Geometrically, the marginal product at any point is the slope of the total product curve at that point, as it measures the rate of change of the total product with respect to the input.

Question 11

Geometrically, the average product
A)is the slope of the line joining the origin to the specified point on the total product curve.
B)at any point is the slope of the total product curve at that point.
C)is that point at which the total product curve exhibits diminishing returns.
D)falls at low levels of input use and rises at high levels of input use.

Accepted Answer

The average product geometrically is represented by the slope of the line joining the origin to a specific point on the total product curve. This slope gives the average output per unit of input.

Question 12

Which is true?
A)Production functions consider only the value added part of a particular production process.
B)Production functions are as subjective as utility functions.
C)Production functions count raw materials, but not labor, as inputs into the production process.
D)Production functions do not count technology into the production process.

Accepted Answer

Production functions only consider the value added part of the production process, which means the output that exceeds the value of the inputs used in the production process. Raw materials and labor are both considered inputs, and technology can also be included in the production function. Utility functions, on the other hand, are more subjective and relate to levels of satisfaction or happiness.

Question 13

In a typical short-run production function, before diminishing returns set in, the slope of the total product curve
A)is decreasing.
B)is increasing.
C)rises and then falls before diminishing returns sets in.
D)falls and then rises before diminishing returns sets in.

Accepted Answer

In the short run, before diminishing returns set in, the slope of the total product curve is increasing. This is because as more units of variable input (labor) are added to a fixed amount of capital, output increases at an increasing rate due to specialization and division of labor.

Question 14

In a value added production function like the one used in the text, raw materials are
A)counted as inputs in a production process.
B)called intermediate goods.
C)are counted in the final product of any production process as part of the value of output.
D)called final goods.

Accepted Answer

The answer of In a value added production function like...

Question 15

In the long run
A)all inputs are fixed.
B)only capital inputs are fixed.
C)all intermediate goods are fixed.
D)all inputs are variable.

Accepted Answer

In the long run, all inputs are considered variable, allowing firms to adjust all factors of production according to their needs. This contrasts with the short run, where at least one input is fixed.

Question 16

When the marginal product curve lies above the average product curve
A)the average product curve must be falling.
B)the total product curve must be falling.
C)the average product curve must be rising.
D)the marginal product curve must be rising.

Accepted Answer

When the marginal product of labor is greater than the average product of labor, it means that the addition of the last unit of labor has produced more than the average, which causes the average product curve to rise.

Question 17

A fixed input is an input that
A)can never be varied.
B)cannot be varied in the short-run.
C)is fixed only for some quantities of output.
D)can never be moved from one location to the next.

Accepted Answer

A fixed input is an input that cannot be varied in the short-run. In the short-run, some inputs are fixed while others are variable. Fixed inputs include things like the size of a factory or the number of machines on a production line, which cannot be changed quickly, while variable inputs are more flexible, like labor or raw materials, which can be adjusted in the short-run.

Question 18

The marginal product of a variable input is
A)zero at the point of diminishing returns.
B)the change in the average product that occurs when the variable input is increased one unit.
C)the change in the total product that occurs in response to a unit change in the variable input.
D)the second derivative of the total product function.

Accepted Answer

The marginal product of a variable input is the change in the total product that occurs in response to a unit change in the variable input. It is the additional output that is produced when one more unit of input is added, and it helps in determining the optimal input level for a firm to maximize its profits.

Question 19

If a chef and her equipment transform $50 worth of raw foodstuff into a meal with a total value of $150, the resulting output would be
A)measured as the $150 total value.
B)referred to as an intermediate product.
C)measured as the $100 of value added.
D)measured as $200 of value added.

Accepted Answer

The value added is calculated by subtracting the cost of raw materials from the final value of the product. In this case, the value added would be $150 - $50 = $100. Therefore, the resulting output would be measured as $100 of value added.

Question 20

Diminishing returns begin to occur when the
A)slope of the ray from the origin reaches a maximum.
B)total product curve reaches a maximum.
C)slope of the total product curve reaches a maximum.
D)marginal product curve intersects the average product curve.

Accepted Answer

Diminishing returns occur when the slope of the total product curve (which represents the amount of output produced by each input) reaches a maximum. This means that adding more inputs will result in smaller increases in output, indicating diminishing marginal returns. The other choices are not accurate descriptions of the point at which diminishing returns occur.

Quiz 8: Production

The law of diminishing returns to an input says that if other inputs are fixed

If equal amounts of a variable input are sequentially added to the fixed input in a typical production function,

In a typical production function, the relevant factors of production are land, labor, capital, and

The nineteenth-century British economist Thomas Malthus argued that the law of diminishing returns implied that

The average product of a variable input

The short run is defined as that period of time during which

In a short-run production function before diminishing returns set in, both MPL and APL will have

When Thomas Malthus argued that the prospects for human flourishing were gloomy and that starvation would eventually become the normal human condition, he was assuming that

If capital and labor are perfect substitutes in a production function, the isoquants for this function will be

Geometrically, the marginal product

Geometrically, the average product

Which is true?

In a typical short-run production function, before diminishing returns set in, the slope of the total product curve

In a value added production function like the one used in the text, raw materials are

In the long run

When the marginal product curve lies above the average product curve

A fixed input is an input that

The marginal product of a variable input is

If a chef and her equipment transform $50 worth of raw foodstuff into a meal with a total value of $150, the resulting output would be

Diminishing returns begin to occur when the