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- 1. Multiple Choice
A production function assumes a given:
technology.
set of input prices.
ratio of input prices.
amount of capital and labor.
amount of output.
- 2. Multiple Choice
Use the following two statements to answer this question:
I. Production functions describe what is technically feasible when the firm operates efficiently.
II. The production function shows the least cost method of producing a given level of output.
Both I and II are true.
I is true, and II is false.
I is false, and II is true.
Both I and II are false.
- 3. Multiple Choice
A farmer uses L units of labor and K units of capital to produce Q units of corn using a production function F(K,L). A production plan that uses K'=L'=10 to produce Q' units of corn where Q'<F(10,10) is said to be:
technically feasible and efficient.
technically unfeasible and efficient.
technically feasible and inefficient.
technically unfeasible and inefficient.
none of the above
- 4. Multiple Choice
Which of the following inputs are variable in the long run?
Labour
Capital and equipment
Plant size
all of above
- 5. Multiple Choice
Joe owns a small coffee shop, and his production function is q = 3KL where q is total output in cups per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). If Joe's capital is currently fixed at K=3 machines, what is his short-run production function?
q = 3L
q = 3L2
q = 9L
q = 3K2
both c and d
- 6. Multiple Choice
For many firms, capital is the production input that is typically fixed in the short run. Which of the following firms would face the longest time required to adjust its capital inputs?
Firm that makes DVD players
Computer chip fabricator
Nuclear power plant
all of above
- 7. Multiple Choice
We manufacturer automobiles given the production function q = 5KL where q is the number of autos assembled per eight-hour shift, K is the number of robots used on the assembly line (capital) and L is the number of workers hired per hour (labor). If we use K = 10 robots and L = 10 workers in order to produce q = 450 autos per shift, then we know that production is:
technologically efficient.
optimal
technologically inefficient.
maximized.
non of the above
- 8. Multiple Choice
Which of the following equations based on capital (K) and labor (L) inputs does not represent a plausible production function?
F(K,L) = 3KL
F(K,L) = 3K
F(K,L) = K + L - 1
F(K,L) = 10(KL)0.5
both b and c
- 9. Multiple Choice
Writing total output as Q, change in output as △Q, total labor employment as L, and change in labor employment as △L, the marginal product of labor can be written algebraically as
ΔQ ∙ L.
Q / L.
ΔQ / ΔL.
ΔL / ΔQ.
both b and d
- 10. Multiple Choice
The marginal product of an input is:
total product divided by the amount of the input used to produce this amount of output.
the addition to total output that adds nothing to total revenue.
the addition to total output that adds nothing to profit.
the addition to total output due to the addition of one unit of all other inputs.
the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.
- 11. Multiple Choice
According to the law of diminishing returns:
the total product of an input will eventually be negative.
the marginal product of an input will eventually be negative.
the marginal product of an input will eventually decline.
the total product of an input will eventually decline.
none of the above
- 12. Multiple Choice
Use the following two statements to answer this question:
I. The marginal product of labor is the slope of the line from the origin to the total product curve at that level of labor usage.
II The average product of labor is the slope of the line that is tangent to the total product curve at that level of labor usage.
Both I and II are true.
I is true, and II is false.
I is false, and II is true.
Both I and II are false.
- 13. Multiple Choice
At which point on the total product curve is the average product of labor the highest?
Point A
Point B
Point C
Point D
- 14. Multiple Choice
Which of the following statements is false?
At point E the marginal product of labor is decreasing.
At point E the marginal product of labor is negative.
At point E the marginal product of labor is less than the average product of labor.
At point E the average product of labor is decreasing.
At point E the average product of labor is negative.
- 15. Multiple Choice
Consider the following statements when answering this question:
I. Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels. This technology obeys the law of diminishing returns.
II. Suppose a semiconductor chip factory uses a technology where the marginal product of labor rises, then is constant and finally falls as employment increases. This technology obeys the law of diminishing returns.
I is true, and II is false.
I is false, and II is true.
Both I and II are true.
Both I and II are false.
- 16. Multiple Choice
Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). What is the marginal product of labor?
MP = 5
MP = 5K
MP = 5L
MP = 5K/L
- 17. Multiple Choice
An isoquant:
must be linear
cannot have a negative slope.
is a curve that shows all the combinations of inputs that yield the same total output.
is a curve that shows the maximum total output as a function of the level of labor input.
is a curve that shows all possible output levels that can be produced at the same cost.
- 18. Multiple Choice
Use the following two statements to answer this question:
I. Isoquants cannot cross one another.
II. An isoquant that is twice the distance from the origin represents twice the level of output.
Both I and II are true.
I is true, and II is false.
I is false, and II is true.
Both I and II are false.
- 19. Multiple Choice
Two isoquants, which represent different output levels but are derived from the same production function, cannot cross because:
isoquants are downward sloping.
additional inputs will not be used by profit maximizing firms if those inputs decrease output.
isoquants represent different utility levels.
this would violate a technical efficiency condition.
both b and d
- 20. Multiple Choice
A construction company builds roads with machinery (capital, K) and labor (L). If we plot the isoquants for the production function so that labor is on the horizontal axis, then a point on the isoquant with a small MRTS (in absolute value) is associated with high ________ use and low ________ use.
labor, capital
capital, labor
concrete, gravel
none of the above
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