Question 1

What is a production function?

Accepted Answer

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Question 2

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 from workers 1-50 implies that marginal product is increasing for those workers. The decreasing rate of increase from workers 51-101 implies that marginal product is decreasing, and beyond 101 workers, total output itself is decreasing, indicating that marginal product is negative. Therefore, marginal product is increasing from workers 1-50, decreasing after 51 workers, and becoming negative after the 101st worker.

Question 3

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

Accepted Answer

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Question 4

Graphically, what happens to the production function if a firm uses automation to raise the amount of output per worker? Explain.

Accepted Answer

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Question 5

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

Accepted Answer

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Question 6

What is the law of diminishing marginal product?

Accepted Answer

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Question 7

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 the point of saturation, adding an additional worker leads to a decrease in total product, indicating that the firm has already achieved maximum output with the current level of resources. This is known as the law of diminishing marginal returns, where additional resources lead to decreasing marginal returns.

Question 8

-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 law of diminishing marginal product sets in when each additional worker contributes less to output than the previous one. This typically occurs after the third worker, as the marginal product starts to decrease.

Question 9

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

This statement describes the concept of the law of diminishing marginal product, which states that as more units of a variable input are added to a fixed input, after a certain point the additional output produced by each additional unit of the variable input will decrease. This law is an important concept in economics and is used to explain why increasing the amount of a factor of production may eventually lead to decreasing marginal returns. The other answer choices are unrelated to this concept.

Question 10

-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 law of diminishing marginal product states that as more units of a variable input (in this case, labor) are added to a fixed input (in this case, capital), the marginal product of the variable input will eventually decrease. In the table, we can see that the marginal product of labor begins to decrease after worker number 3 is added.

Question 11

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 starts to decrease, it means that the marginal product of each additional unit of the variable input is below the average product. Therefore, the marginal product becomes negative.

Question 12

-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 when the additional output from an extra unit of labor starts to decrease. This typically occurs after a certain point of adding labor, assuming other factors remain constant. Without the specific table data, the general principle is that after initially increasing, the marginal product (additional output per additional unit of labor) begins to fall, indicating the onset of diminishing returns. Since the correct choice is B, it implies that after adding 2 units of labor, the additional output from each subsequent unit of labor begins to decrease.

Question 13

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 14

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 is an example of diminishing marginal product, which occurs when adding more of a certain input (in this case, waiters) results in a smaller increase in output (number of dinners served). The manager has observed that adding too many waiters leads to decreased efficiency, indicating that there is a point at which additional waiters no longer contribute much to the restaurant's output.

Question 15

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 states that as a firm adds more units of a variable input (such as labor) to a fixed input (such as capital) in the short run, the marginal product of the variable input will eventually decrease. This means that each additional unit of the variable input will contribute less and less to overall output, eventually leading to negative returns to scale. Therefore, the law of diminishing marginal product describes the relationship between inputs and outputs for a firm in the short run.

Question 16

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 output produced from each additional unit of input decreases. This indicates that the firm has reached its production capacity and any further increase in input will result in a decrease in output.

Question 17

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 18

-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.

Question 19

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

Accepted Answer

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Question 20

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

When the marginal product of labor is greater than the average product of labor, it means that each additional unit of labor is producing more output than the average. This will pull the average product of labor up, causing it to rise. Therefore, the correct answer is B.

Quiz 22: The Firm: Cost and Output Determination

What is a production function?

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

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

Graphically, what happens to the production function if a firm uses automation to raise the amount of output per worker? Explain.

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

What is the law of diminishing marginal product?

What happens at a firm's point of saturation?

-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

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

When total product is decreasing, marginal product is

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

Total product will start to decrease

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

The law of diminishing marginal product shows the relationship

The point of saturation occurs when a firm

If marginal product is zero, we know that

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

Describe the concept of the production function. What happens to the production function when a firm becomes less efficient, so that it now requires more labor to produce the same amount of output as before?

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