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The average product of labor at a particular point can be determined:


A) by the slope of the total product curve at that point.
B) by multiplying the total product by the quantity of labor at that point.
C) by the slope of a line from the origin to the particular point on the total product curve.
D) by the vertical distance of the average product curve from the marginal product curve.

E) A) and B)
F) None of the above

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The chemical industry is relatively capital-intensive.It uses more capital than labor.Conversely,the garment industry is relatively labor-intensive (it uses a larger proportion of labor then capital).How would you represent the isoquants for chemicals and garments on an isoquant map with labor on the horizontal axis and capital on the vertical axis?

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The isoquants for garments and chemicals...

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A production function of the form Q = aLbKc:


A) implies constant marginal products for the inputs.
B) implies constant average products for the inputs.
C) incorporates the assumption of diminishing returns to the inputs.
D) cannot imply diminishing returns to the inputs.

E) A) and B)
F) None of the above

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According to the law of diminishing marginal returns:


A) when the amount of some input is increased by equal increments,holding other inputs constant,the resulting increments in output will be negative.
B) when all inputs are increased proportionately,output eventually will decrease at a smaller rate.
C) when the amount of some input is increased at equal increments,holding other inputs constant,the resulting increments in output will eventually decrease.
D) firms will not operate on the portion of the total product curve where marginal product is declining.

E) A) and D)
F) A) and C)

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Table 7-3 shows the combinations of labor and capital required to produce various level of output. Table 7-3 Table 7-3 shows the combinations of labor and capital required to produce various level of output. Table 7-3 -Refer to Table 7-3.If the firm is currently producing 26 units of output using three units of labor,what is the marginal rate of technical substitution of labor for capital at this point? A) -1 B) -2 C) -3 D) -4 -Refer to Table 7-3.If the firm is currently producing 26 units of output using three units of labor,what is the marginal rate of technical substitution of labor for capital at this point?


A) -1
B) -2
C) -3
D) -4

E) A) and B)
F) A) and C)

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Which of the following represents a Cobb-Douglas production function?


A) Q = a + bL + cK
B) Q = a + Lb + Kc
C) Q = aLbKc
D) Q = L + K

E) C) and D)
F) A) and D)

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Which of the following statements about the marginal rate of technical substitution is correct?


A) The MRTS is equal to the ratio of the marginal productivities of the inputs.
B) The MRTS is equal to the slope of the total product curve.
C) The MRTS is zero in the long run.
D) The MRTS is the rate at which one input can be substituted for the other in production while varying the level of output.

E) A) and D)
F) All of the above

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Define and then derive the expression for the marginal rate of technical substitution.

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blured image The marginal rate of technical substitu...

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The production function exhibits increasing returns to scale when a firm can increase production by more than a proportionate increase in _____.


A) costs
B) one input
C) all inputs
D) a fixed input

E) B) and C)
F) A) and D)

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Table 7-3 shows the combinations of labor and capital required to produce various level of output. Table 7-3 Table 7-3 shows the combinations of labor and capital required to produce various level of output. Table 7-3 -Refer to Table 7-3.Assume that capital remains fixed while labor is the only variable input used in production.If the firm is currently producing 26 units of output using three units of labor,what is the marginal product of labor at this point? A) 2 B) 4 C) 6 D) 8 -Refer to Table 7-3.Assume that capital remains fixed while labor is the only variable input used in production.If the firm is currently producing 26 units of output using three units of labor,what is the marginal product of labor at this point?


A) 2
B) 4
C) 6
D) 8

E) B) and C)
F) None of the above

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What can you conclude about an isoquant that is concave to the origin?


A) The level of output shown on the isoquant increases along the curve.
B) The isoquant represents production in the short run as one input is kept fixed.
C) The marginal rate of technical substitution increases along the curve.
D) The slope of the isoquant is infinite.

E) All of the above
F) A) and B)

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If a firm doubles its usage of all inputs,and output more than doubles,the production function is said to exhibit:


A) increasing returns to scale.
B) decreasing returns to scale.
C) constant returns to scale.
D) increasing marginal returns to a fixed factor of production.

E) A) and D)
F) C) and D)

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The duration of the short run varies by industry because _____.


A) the total labor demand varies by industry
B) some inputs cost more in some industries
C) the technology used in production is not the same in all industries
D) the time required to change a variable input differs by industry

E) A) and D)
F) All of the above

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Isoquants that are farther away from the origin indicate:


A) lower cost combinations of inputs.
B) technologically inefficient levels of output.
C) higher levels of output.
D) combinations of inputs that are less preferred.

E) All of the above
F) A) and B)

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Diminishing marginal returns refers to the:


A) decline in the rate at which extra inputs are employed in production.
B) fall in average product associated with a unit increase in the fixed input.
C) decline in total product which is less than proportionate to a change in the fixed input.
D) fall in output per unit with an incremental increase in the variable input.

E) None of the above
F) All of the above

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Suppose that at a point on an isoquant,the following information is true: MPL = 3 and MPK = 2.Then if K falls by 5,L must increase by:


A) 0.30.
B) 0.67.
C) 3.33.
D) 1.50.

E) C) and D)
F) B) and C)

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Returns to scale can be evaluated by looking at how output changes along _____.


A) a ray from the origin
B) the points of intersection of two or more isoquants
C) the horizontal axis
D) an isoquant.

E) A) and B)
F) B) and D)

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The power associated with an input in a Cobb-Douglas production function implies diminishing returns to that input if the power is _____.


A) greater than 1
B) less than 1
C) equal to 1
D) zero

E) B) and D)
F) B) and C)

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Table 7-4 shows the shows the quantities of labor and capital required to produce various levels of output. Table 7-4  Quantity of  Capital  Quantity  of Labor  Output 624012410024822048164409632800\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity of } \\\text { Capital }\end{array} & \begin{array} { c } \text { Quantity } \\\text { of Labor }\end{array} & \text { Output } \\\hline 6 & 2 & 40 \\\hline 12 & 4 & 100 \\\hline 24 & 8 & 220 \\\hline 48 & 16 & 440 \\\hline 96 & 32 & 800 \\\hline\end{array} -Refer to Table 7-4.When the firm increases production from 24 units of capital and 8 units of labor to 48 units of capital and 16 units of labor,the production function exhibits:


A) decreasing marginal rate of technical substitution.
B) constant returns to scale.
C) increasing returns to scale.
D) diminishing marginal returns

E) B) and D)
F) A) and B)

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Convexity of a curve implies that the slope of the curve:


A) is zero.
B) is constant.
C) diminishes along the curve.
D) approaches infinity.

E) B) and C)
F) A) and B)

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