Question 1

Economists typically assume that the owners of firms wish to

Accepted Answer

A)  produce efficiently.
B)  maximize sales revenues.
C)  maximize profits.
D)  All of the above.E) C) and D)
F) A) and D)

Question 2

-The above figure shows the isoquants for producing steel.When producing between 10,000 and 20,000 tons there are

Accepted Answer

A)  increasing returns to scale.
B)  decreasing returns to scale.
C)  constant returns to scale.
D)  economies of scale.E) All of the above
F) B) and C)

Question 3

What do we mean by efficient production?

Accepted Answer

Efficient production implies t...

Question 4

The average product of labor is

Accepted Answer

A)  the change in total product resulting from an extra unit of labor,holding other factors constant.
B)  the ratio of output to the number of workers used to produce that output.
C)  the amount of output that can be produced by a given amount of labor.
D)  equal to the marginal product of labor when the average product is increasing.E) A) and D)
F) A) and B)

Question 5

If the marginal product of labor is constant for all levels of output,then the average product of labor

Accepted Answer

A)  is constant.
B)  equals the marginal product of labor.
C)  Both A and B above.
D)  Either A or B above but not both.E) A) and B)
F) C) and D)

Question 6

Total product is maximized where

Accepted Answer

A)  average product is maximized.
B)  marginal product is maximized.
C)  average product is equal to 0.
D)  marginal product is equal to 0.E) B) and C)
F) A) and B)

Question 7

A firm operating with diminishing total returns cannot be profit maximizing.

Accepted Answer

A) True 
 B)False

Question 8

Homer's Donut Shoppe has the production function q = 10L +20L2 - 5L3.The average product of labor is

Accepted Answer

A)  AP = 10 + 20L - 5L2
B)  AP = 10 + 40L - 15L2
C)  AP = 10L
D)  AP = 10 + 20LE) B) and D)
F) All of the above

Question 9

If marginal productivity is increasing,then total product is

Accepted Answer

A)  increasing at an increasing speed.
B)  increasing at a constant speed.
C)  increasing at a decreasing speed.
D)  decreasing at an increasing speed.E) A) and B)
F) A) and C)

Question 10

The returns to scale of the production function Q = 50 L0.4 K0.2 are

Accepted Answer

A)  50.
B)  .6.
C)  .8.
D)  500.6.E) C) and D)
F) A) and C)

Question 11

Which of the following statements best summarizes the law of diminishing marginal returns?

Accepted Answer

A)  In the short run,as more labor is hired,output diminishes.
B)  In the short run,as more labor is hired,output increases at a diminishing rate.
C)  In the short run,the amount of labor a firm will hire diminishes as output increases.
D)  As more labor is hired,the length of time that defines the short run diminishes.E) C) and D)
F) B) and C)

Question 12

Isoquants that are downward-sloping straight lines imply that the inputs

Accepted Answer

A)  are perfect substitutes.
B)  are imperfect substitutes.
C)  cannot be used together.
D)  must be used together in a certain proportion.E) All of the above
F) B) and C)

Question 13

Returns to scale refers to the change in output when

Accepted Answer

A)  all inputs increase proportionately.
B)  labor increases holding all other inputs fixed.
C)  capital equipment is doubled.
D)  specialization improves.E) B) and C)
F) A) and C)

Question 14

Let the production function be q = ALaKb.The function exhibits increasing returns to scale if

Accepted Answer

A)  a + b = 1.
B)  a + b > 1.
C)  a + b 
D)  Cannot be determined with the information given.E) A) and C)
F) B) and D)

Question 15

For what values of a and b will the following production function exhibit increasing,decreasing or constant returns to scale?
q = (La + Ka)1/b

Accepted Answer

Let q = f(L,K).Then
f(2L,2K)= ...

Question 16

An isoquant represents levels of capital and labor that

Accepted Answer

A)  have constant marginal productivity.
B)  yield the same level of output.
C)  incur the same total cost.
D)  All of the above.E) B) and D)
F) B) and C)

Question 17

In the long run,all factors of production are

Accepted Answer

A)  variable.
B)  fixed.
C)  materials.
D)  rented.E) All of the above
F) A) and C)

Question 18

Efficient production occurs if a firm

Accepted Answer

A)  cannot produce its current level of output with fewer inputs.
B)  given the quantity of inputs,cannot produce more output.
C)  maximizes profit.
D)  All of the above.E) C) and D)
F) B) and C)

Question 19

Find the Marginal Rate of Technical Substitution for the following production functions:
a.q = L0.5 K0.5
b.q = L0.5 + K0.5
c.q = min{K,L}
d.q = L + K

Accepted Answer

a.K/L
b.K/L
c.- infi...

Question 20

Were it not for the law of diminishing marginal returns,we could grow the world's food supply from a flowerpot.

Accepted Answer

A) True 
 B)False

Exam 6: Firms and Production

Were it not for the law of diminishing marginal returns,we could grow the world's food supply from a flowerpot.

Correct AnswerverifiedShow Answer

Efficient production occurs if a firm

Correct AnswerverifiedShow Answer

For what values of a and b will the following production function exhibit increasing,decreasing or constant returns to scale? q = (La + Ka)1/b

Correct AnswerverifiedLet q = f(L,K).Thenf(2L,2K)= ...View AnswerShow Answer

Let the production function be q = ALaKb.The function exhibits increasing returns to scale if

Correct AnswerverifiedShow Answer

-The above figure shows the isoquants for producing steel.When producing between 10,000 and 20,000 tons there are

Correct AnswerverifiedShow Answer

If the marginal product of labor is constant for all levels of output,then the average product of labor

Correct AnswerverifiedShow Answer

Which of the following statements best summarizes the law of diminishing marginal returns?

Correct AnswerverifiedShow Answer

A firm operating with diminishing total returns cannot be profit maximizing.

Correct AnswerverifiedShow Answer

Isoquants that are downward-sloping straight lines imply that the inputs

Correct AnswerverifiedShow Answer

Economists typically assume that the owners of firms wish to

Correct AnswerverifiedShow Answer

In the long run,all factors of production are

Correct AnswerverifiedShow Answer

What do we mean by efficient production?

Correct AnswerverifiedEfficient production implies t...View AnswerShow Answer

Returns to scale refers to the change in output when

Correct AnswerverifiedShow Answer

The average product of labor is

Correct AnswerverifiedShow Answer

If marginal productivity is increasing,then total product is

Correct AnswerverifiedShow Answer

Find the Marginal Rate of Technical Substitution for the following production functions: a.q = L0.5 K0.5 b.q = L0.5 + K0.5 c.q = min{K,L} d.q = L + K

Correct Answerverifieda.K/Lb.K/Lc.- infi...View AnswerShow Answer

An isoquant represents levels of capital and labor that

Correct AnswerverifiedShow Answer

The returns to scale of the production function Q = 50 L0.4 K0.2 are

Correct AnswerverifiedShow Answer

Homer's Donut Shoppe has the production function q = 10L +20L2 - 5L3.The average product of labor is

Correct AnswerverifiedShow Answer

Total product is maximized where

Correct AnswerverifiedShow Answer

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For what values of a and b will the following production function exhibit increasing,decreasing or constant returns to scale? q = (L^a + K^a)^1/^b

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Let q = f(L,K).Then
f(2L,2K)= ...
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Let the production function be q = AL^aK^b.The function exhibits increasing returns to scale if

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Efficient production implies t...
View Answer

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Find the Marginal Rate of Technical Substitution for the following production functions: a.q = L^0.5K^0.5 b.q = L^0.5 + K^0.5 c.q = min{K,L} d.q = L + K

Correct Answer
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a.K/L
b.K/L
c.- infi...
View Answer

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The returns to scale of the production function Q = 50 L^0.4 K^0.2 are

Correct Answer
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Homer's Donut Shoppe has the production function q = 10L +20L²- 5L³.The average product of labor is

Correct Answer
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Correct Answer
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