Question 1

Justin's bank employs tellers and ATMs.Both are able to serve clients in the exact same way and therefore are perfect substitutes.Describe the elasticity of substitution between the two inputs.

Accepted Answer

The elasticity is infinite.The...

Question 2

Total Product 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.

Question 3

For the following, please answer "True" or "False" and explain why.
-Unlike indifference curves,isoquants can intersect.

Accepted Answer

A) True 
 B)False

Question 4

For the following, please answer "True" or "False" and explain why.
-Changing how production is organized cannot result in changes in productivity.

Accepted Answer

A) True 
 B)False

Question 5

The slope of an isoquant tells us

Accepted Answer

A)   how much output increases when both inputs are increased.
B)   the increase in MPL when capital increases.
C)   the decrease in capital necessary to keep output constant when labor increases by one unit.
D)   the decrease in capital necessary to keep MPL constant when labor increases by one unit.

Question 6

The marginal rate of technical substitution always equals

Accepted Answer

A)   the slope of the total product curve.
B)   the ratio of the marginal products of inputs.
C)   the change in output due to a change in the amount of one input.
D)   the distance between two isoquants.

Question 7

Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?

Accepted Answer

A)   q = L + 5K
B)   q = 5 ∗ (L + K) 
C)   q = 5L + K
D)   All of the above are possible.

Question 8

Suppose the production function for T-shirts can be represented as q = L⁰.²⁵ K⁰.⁷⁵.Show that the production function has constant returns to scale.

Accepted Answer

When L = L₁ and K = K₁,q = q₁.Let L₂ = γ...

Question 9

Suppose firms A and B each make T-shirts.Firm A's production function is q = L⁰.⁵ K⁰.⁵.Firm B's production function is q = 1.2 ∗ L⁰.⁵ K⁰.⁵.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of APL and MPL.

Accepted Answer

Firm B's APL and MPL...

Question 10

Joey cuts lawns during the summer.Let q equal the number of acres mowed per day,and let L equal the number of hours worked per day.Joey never works more than eight hours per day,and during that time his short-run production function is q = 0.2 ∗ L.Which of the following statements is FALSE?

Accepted Answer

A)   Joey's marginal productivity equals his average productivity.
B)   Joey's marginal productivity diminishes by 0.2 for each additional hour worked.
C)   Joey's average productivity is constant.
D)   Joey's marginal productivity is constant.

Question 11

Joey cuts grass during the summer.He owns one lawn mower.For him,the short run is equal to

Accepted Answer

A)   the amount of time it takes to acquire more customers.
B)   the amount of time it takes to hire an additional employee.
C)   the amount of time it takes to hire an additional employee and buy another lawn mower.
D)   the amount of time it takes to mow one lawn.

Question 12

The implementation of the assembly line is an example how

Accepted Answer

A)   changes in the organization of production improve productivity.
B)   neutral technical change improves productivity.
C)   non-neutral technical change can decrease productivity.
D)   labor saving technical change increases economy-wide unemployment.

Question 13

Production occurs using the fixed-proportion combination of one worker for every one unit of capital.Draw the isoquants for this production function.After one unit of output is produced,does this production function exhibit constant,increasing,or decreasing returns to scale?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> See the above figur...

Question 14

For the following, please answer "True" or "False" and explain why.
-Cobb-Douglas production functions can never possess varying returns to scale.

Accepted Answer

A) True 
 B)False

Question 15

Thomas Malthus' prediction of mass starvation resulting from diminishing marginal returns has not been fulfilled because

Accepted Answer

A)   the law of diminishing marginal returns did not hold in this case.
B)   Malthus ignored other factors like technological change.
C)   relative to Malthus' day, a larger percentage of today's labor works in the agricultural sector.
D)   All of the above.

Question 16

For the following, please answer "True" or "False" and explain why.
-The length of the short-run is the same for all firms.

Accepted Answer

A) True 
 B)False

Question 17

Describe the relationship between marginal productivity and average productivity.Use calculus or a graph to support your answer.

Accepted Answer

AP = Q(L)/L.dAP/dL = ([L ∗ MP]...

Question 18

Dell computers has increased production efficiency by

Accepted Answer

A)   producing output with fewer inputs.
B)   expanding the amount of inputs used.
C)   outsourcing production.
D)   relying on decreasing returns to scale.

Question 19

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.

Question 20

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.

Exam 6: Firms and Production

Describe the relationship between marginal productivity and average productivity.Use calculus or a graph to support your answer.

Correct AnswerverifiedAP = Q(L)/L.dAP/dL = ([L ∗ MP]...View AnswerShow Answer

Thomas Malthus' prediction of mass starvation resulting from diminishing marginal returns has not been fulfilled because

Correct AnswerverifiedShow Answer

For the following, please answer "True" or "False" and explain why. -Unlike indifference curves,isoquants can intersect.

Correct AnswerverifiedShow Answer

Total Product is

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Joey cuts grass during the summer.He owns one lawn mower.For him,the short run is equal to

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The marginal rate of technical substitution always equals

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For the following, please answer "True" or "False" and explain why. -Changing how production is organized cannot result in changes in productivity.

Correct AnswerverifiedShow Answer

Joey cuts lawns during the summer.Let q equal the number of acres mowed per day,and let L equal the number of hours worked per day.Joey never works more than eight hours per day,and during that time his short-run production function is q = 0.2 ∗ L.Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Justin's bank employs tellers and ATMs.Both are able to serve clients in the exact same way and therefore are perfect substitutes.Describe the elasticity of substitution between the two inputs.

Correct AnswerverifiedThe elasticity is infinite.The...View AnswerShow Answer

Economists typically assume that the owners of firms wish to

Correct AnswerverifiedShow Answer

Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?

Correct AnswerverifiedShow Answer

Suppose the production function for T-shirts can be represented as q = L⁰.²⁵ K⁰.⁷⁵.Show that the production function has constant returns to scale.

Correct AnswerverifiedWhen L = L₁ and K = K₁,q = q₁.Let L₂ = γ...View AnswerShow Answer

Dell computers has increased production efficiency by

Correct AnswerverifiedShow Answer

Production occurs using the fixed-proportion combination of one worker for every one unit of capital.Draw the isoquants for this production function.After one unit of output is produced,does this production function exhibit constant,increasing,or decreasing returns to scale?

Correct Answerverified See the above figur...View AnswerShow Answer

The slope of an isoquant tells us

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose firms A and B each make T-shirts.Firm A's production function is q = L⁰.⁵ K⁰.⁵.Firm B's production function is q = 1.2 ∗ L⁰.⁵ K⁰.⁵.If the two firms each hire the same amounts of capital and labor,compare the two firms in terms of APL and MPL.

Correct AnswerverifiedFirm B's APL and MPL...View AnswerShow Answer

For the following, please answer "True" or "False" and explain why. -Cobb-Douglas production functions can never possess varying returns to scale.

Correct AnswerverifiedShow Answer

The implementation of the assembly line is an example how

Correct AnswerverifiedShow Answer

For the following, please answer "True" or "False" and explain why. -The length of the short-run is the same for all firms.

Correct AnswerverifiedShow Answer

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AP = Q(L)/L.dAP/dL = ([L ∗ MP]...
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The elasticity is infinite.The...
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When L = L₁ and K = K₁,q = q₁.Let L₂ = γ...
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See the above figur...
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Firm B's APL and MPL...
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