# Quiz 6: Production

Business

Q 1Q 1

A production function defines the output that can be produced:
A) at the lowest cost, given the inputs available.
B) for the average firm.
C) if the firm is technically efficient.
D) in a given time period if no additional inputs are hired.
E) as technology changes over time.

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Multiple Choice

C

Q 2Q 2

A production function assumes a given:
A) technology.
B) set of input prices.
C) ratio of input prices.
D) amount of capital and labor.
E) amount of output.

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Multiple Choice

A

Q 3Q 3

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called:
A) an isoquant.
B) a production possibility curve.
C) a production function.
D) an isocost function.

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Multiple Choice

C

Q 4Q 4

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.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

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Multiple Choice

Q 5Q 5

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 to produce Q' units of corn where is said to be:
A) technically feasible and efficient.
B) technically unfeasible and efficient.
C) technically feasible and inefficient.
D) technically unfeasible and inefficient.
E) none of the above

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Multiple Choice

Q 6Q 6

Which of the following inputs are variable in the long run?
A) Labor
B) Capital and equipment
C) Plant size
D) all of these

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Multiple Choice

Q 7Q 7

The short run is:
A) less than a year.
B) three years.
C) however long it takes to produce the planned output.
D) a time period in which at least one input is fixed.
E) a time period in which at least one set of outputs has been decided upon.

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Multiple Choice

Q 8Q 8

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?
A) q = 3L
B) q = 3L

^{2}C) q = 9L D) q = 3K^{2}Free

Multiple Choice

Q 9Q 9

Suppose there are ten identical manufacturing firms that produce computer chips with machinery (capital, K) and labor (L), and each firm has a production function of the form q = 10KL

^{0.5}. What is the industry-level production function? A) Q = 10K^{10}L^{5}B) Q = 100KL^{0.5}C) Q = 100L^{0.5}D) none of the aboveFree

Multiple Choice

Q 10Q 10

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?
A) Firm that makes DVD players
B) Computer chip fabricator
C) Flat-screen TV manufacturer
D) Nuclear power plant

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Multiple Choice

Q 11Q 11

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:
A) technologically efficient.
B) technologically inefficient.
C) maximized.
D) optimal.

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Multiple Choice

Q 12Q 12

Some economists conduct empirical research on the theory of the firm by measuring the degree of technical efficiency achieved by actual firms. What type of research contributions are provided by these studies?
A) Normative
B) Positive
C) Administrative
D) Executive

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Multiple Choice

Q 13Q 13

Which of the following actions is NOT an example of the production coordination provided by firms?
A) Manage production activities of workers
B) Pay wages to workers
C) Establish industry safety regulations
D) Set the production schedule for each week

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Multiple Choice

Q 14Q 14

Which of the following equations based on capital (K) and labor (L) inputs does not represent a plausible production function?
A) F(K,L) = 3KL
B) F(K,L) = 3K
C) F(K,L) = K + L - 1
D) F(K,L) = 10(KL)

^{0.5}Free

Multiple Choice

Q 15Q 15

Ronald's Outboard Motor Manufacturing plant production function is Ronald is investigating a new outboard motor manufacturing technique. Ronald believes that if he adopts the new technique, his production function for outboard motors will become: Given that Ronald uses 4 units of machine hours, sketch his production function with the old technique and the new technique as he increases labor hours. With the new technique, do labor hours contribute more to production?

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Essay

Q 16Q 16

Wally describes himself as a resilient fundamentalist when it comes to making investments in the stock market. At the moment, Wally uses only periodicals from the library when analyzing corporate fundamentals. The number of firms he can analyze in a day is given by the function: where L is the number of hours a day he works. Sketch Wally's total number of firms analyzed as he increases his hours of work. If Wally begins using Internet sources to learn about corporate fundamentals, the number of firms he can analyze in a day is given by the function: Sketch Wally's total number of firms analyzed as he increases his hours of work and uses the Internet.

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Essay

Q 17Q 17

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:
A) ΔQ ∙ L.
B) Q / L.
C) ΔL / ΔQ.
D) ΔQ / ΔL.

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Multiple Choice

Q 18Q 18

The slope of the total product curve is the:
A) average product.
B) slope of a line from the origin to the point.
C) marginal product.
D) marginal rate of technical substitution.

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Multiple Choice

Q 19Q 19

The law of diminishing returns refers to diminishing:
A) total returns.
B) marginal returns.
C) average returns.
D) all of these.

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Multiple Choice

Q 20Q 20

When labor usage is at 12 units, output is 36 units. From this we may infer that:
A) the marginal product of labor is 3.
B) the total product of labor is 1/3.
C) the average product of labor is 3.
D) none of the above

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Multiple Choice

Q 21Q 21

The marginal product of an input is:
A) total product divided by the amount of the input used to produce this amount of output.
B) the addition to total output that adds nothing to total revenue.
C) the addition to total output that adds nothing to profit.
D) the addition to total output due to the addition of one unit of all other inputs.
E) the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

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Multiple Choice

Q 22Q 22

When the average product is decreasing, marginal product:
A) equals average product.
B) is increasing.
C) exceeds average product.
D) is decreasing.
E) is less than average product.

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Multiple Choice

Q 23Q 23

Technological improvement:
A) can hide the presence of diminishing returns.
B) can be shown as a shift in the total product curve.
C) allows more output to be produced with the same combination of inputs.
D) All of the above are true.

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Multiple Choice

Q 24Q 24

Which of the following ideas were central to the conclusions drawn by Thomas Malthus in his 1798 "Essay on the Principle of Population"?
A) Short-run time period
B) Shortage of labor
C) Law of diminishing resource availability
D) Law of diminishing returns

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Multiple Choice

Q 25Q 25

The law of diminishing returns assumes that:
A) there is at least one fixed input.
B) all inputs are changed by the same percentage.
C) additional inputs are added in smaller and smaller increments.
D) all inputs are held constant.

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Multiple Choice

Q 26Q 26

According to the law of diminishing returns:
A) the total product of an input will eventually be negative.
B) the total product of an input will eventually decline.
C) the marginal product of an input will eventually be negative.
D) the marginal product of an input will eventually decline.
E) none of the above

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Multiple Choice

Q 27Q 27

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.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

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Multiple Choice

Q 28Q 28

In a certain textile firm, labor is the only short term variable input. The manager notices that the marginal product of labor is the same for each unit of labor, which implies that:
A) the average product of labor is always greater that the marginal product of labor.
B) the average product of labor is always equal to the marginal product of labor.
C) the average product of labor is always less than the marginal product of labor.
D) as more labor is used, the average product of labor falls.
E) there is no unambiguous relationship between labor's marginal and average products.

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Multiple Choice

Q 29Q 29

At a given level of labor employment, knowing the difference between the average product of labor and the marginal product of labor tells you:
A) whether increasing labor use raises output.
B) whether increasing labor use changes the marginal product of labor.
C) whether economies of scale exist.
D) whether the law of diminishing returns applies.
E) how increasing labor use alters the average product of labor.

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Multiple Choice

Q 30Q 30

If the law of diminishing returns applies to labor then:
A) the marginal product of labor must eventually become negative.
B) the average product of labor must eventually become negative.
C) the marginal product of labor must rise and then fall as employment rises.
D) the average product of labor must rise and then fall as employment increases.
E) after some level of employment, the marginal product of labor must fall.

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Multiple Choice

Q 31Q 31

The law of diminishing returns applies to:
A) the short run only.
B) the long run only.
C) both the short and the long run.
D) neither the short nor the long run.
E) all inputs, with no reference to the time period.

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Multiple Choice

Q 32Q 32

The Malthusian dilemma relates to marginal product in that:
A) starvation can be averted only if marginal product is constant.
B) because of diminishing marginal product, the amount of food produced by each additional member of the population increases.
C) because of diminishing marginal product, the amount of food produced by each additional member of the population decreases.
D) because of diminishing marginal product, the wage falls as the population decreases.
E) because of diminishing average product, the population will not have additional capital to work with.

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Multiple Choice

Q 33Q 33

Marginal product crosses the horizontal axis (is equal to zero) at the point where:
A) average product is maximized.
B) total product is maximized.
C) diminishing returns set in.
D) output per worker reaches a maximum.
E) All of the above are true.

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Multiple Choice

Q 34Q 34

Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen,
A) marginal product is rising.
B) marginal product is falling.
C) average product is rising.
D) average product is falling.

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Multiple Choice

Q 35Q 35

Figure 6.2.1
-Refer to Figure 6.2.1 above. At point A, the marginal product of labor is:
A) rising.
B) at its minimum.
C) at its maximum.
D) diminishing.

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Multiple Choice

Q 36Q 36

Figure 6.2.1
-Refer to Figure 6.2.1 above. At which point on the total product curve is the average product of labor the highest?
A) Point A
B) Point B
C) Point C
D) Point D
E) None of the above

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Multiple Choice

Q 37Q 37

Figure 6.2.1
-Refer to Figure 6.2.1 above. Which of the following statements is false?
A) At point E the marginal product of labor is decreasing.
B) At point E the marginal product of labor is negative.
C) At point E the average product of labor is decreasing.
D) At point E the average product of labor is negative.
E) At point E the marginal product of labor is less than the average product of labor.

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Multiple Choice

Q 38Q 38

Figure 6.2.1
-Refer to Figure 6.2.1 above. At point C:
A) the marginal product of labor is greater than the average product of labor.
B) the average product of labor is greater than the marginal product of labor.
C) the marginal product of labor and the average product of labor are equal.
D) the marginal product of labor and the average product of labor are both increasing.
E) Both B and D are correct.

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Multiple Choice

Q 39Q 39

For consideration of such issues as labor's productivity growth nationwide, the relevant measure is the:
A) marginal product of labor.
B) average product of labor.
C) total product of labor.
D) wage.
E) cost of capital.

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Multiple Choice

Q 40Q 40

The link between the productivity of labor and the standard of living is:
A) tenuous and changing.
B) inverse.
C) that over the long run, consumers as a whole can increase their rate of consumption only by increasing labor productivity.
D) that over the long run, consumers' rate of consumption is not related to labor productivity.
E) that the productivity of labor grows much more erratically than the standard of living.

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Multiple Choice

Q 41Q 41

Which would not increase the productivity of labor?
A) An increase in the size of the labor force
B) An increase in the quality of capital
C) An increase in the quantity of capital
D) An increase in technology
E) An increase in the efficiency of energy

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Multiple Choice

Q 42Q 42

One of the factors contributing to the fact that labor productivity is higher in the U.S. than in the People's Republic of China is:
A) China's larger stock of capital.
B) the higher capital/labor ratio in China.
C) the higher capital/labor ratio in the U.S.
D) China's smaller stock of fossil fuels.
E) the fact that much labor in the U.S. is in management.

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Multiple Choice

Q 43Q 43

What describes the graphical relationship between average product and marginal product?
A) Average product cuts marginal product from above, at the maximum point of marginal product.
B) Average product cuts marginal product from below, at the maximum point of marginal product.
C) Marginal product cuts average product from above, at the maximum point of average product.
D) Marginal product cuts average product from below, at the maximum point of average product.
E) Average and marginal product do not intersect.

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Multiple Choice

Q 44Q 44

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.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

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Multiple Choice

Q 45Q 45

Consider the following statements when answering this question: I. Whenever the marginal product of labor curve is a downward sloping curve, the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve.
II) If a firm uses only labor to produce, and the production function is given by a straight line, then the marginal product of labor always equals the average product of labor as labor employment expands.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

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Multiple Choice

Q 46Q 46

You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. Three employees can generate an average product of 4 cars per person in each hour, and five employees can generate an average product of 3 cars per person in each hour. What is the marginal product of labor as you increase the labor from three to five employees?
A) MP = 3 cars
B) MP = 1.5 cars
C) MP = 15 cars
D) MP = -1 cars

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Multiple Choice

Q 47Q 47

You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. As you increased the number of employees hired per hour from three to five, your total output increased by 5 cars to 15 cars per hour. What is the average product of labor at the new levels of labor?
A) AP = 3 cars per worker
B) AP = 5 cars per worker
C) AP = 4 cars per worker
D) We do not have enough information to answer this question.

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Multiple Choice

Q 48Q 48

An important factor that contributes to labor productivity growth is:
A) growth in the capital stock.
B) technological change.
C) the standard of living.
D) A and B only
E) A, B, and C are correct.

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Multiple Choice

Q 49Q 49

Figure 6.2.2
-Refer to Figure 6.2.2 above. This figure shows the impact of technological improvements and conveys the idea that:
A) productivity increases with technology, but just as labor is subject to diminishing returns, so is technology.
B) technology causes an increase in the output per time period, but as the production functions show, the contributions of technology are also subject to diminishing marginal returns.
C) even though any given production process exhibits diminishing returns, labor productivity increases with technological improvements.
D) without an increase in the productivity of labor, the contributions of technology are insufficient to avoid diminishing returns as the production function shifts upward.

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Multiple Choice

Q 50Q 50

Figure 6.2.2
-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 average product of labor?
A) AP = 5
B) AP = 5K
C) AP = 5L
D) AP = 5K/L

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Multiple Choice

Q 51Q 51

Figure 6.2.2
-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?
A) MP = 5
B) MP = 5K
C) MP = 5L
D) MP = 5K/L

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Multiple Choice

Q 52Q 52

Figure 6.2.2
-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). The average product of labor and the marginal product of labor are both equal to AP = MP = 5K. Does labor exhibit diminishing marginal returns in this case?
A) Yes, if capital also exhibits diminishing marginal returns.
B) Yes, this is true for all values of K.
C) No, the marginal product of labor is constant (for a given K).
D) No, the marginal product of labor is increasing (for a given K).

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Multiple Choice

Q 53Q 53

The concerns about world food production raised by Malthus have not materialized because:
A) input prices have fallen over time.
B) crop prices have risen over time.
C) Malthus was wrong about the diminishing returns to labor in agriculture.
D) technological improvements have increased our ability to produce food over time.

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Multiple Choice

Q 54Q 54

Which of the following statements does not explain why US health care expenditures are higher than in other countries?
A) Government policies have shifted the health care production function downward over time.
B) Consumer incomes have increased, which allows consumers to purchase more health care.
C) The US health care system is relatively inefficient compared to other countries.
D) Demand for health care in the US has increased, so health care production occurs at a higher point on the total product curve than in other countries.

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Multiple Choice

Q 55Q 55

As an economy recovers from a recession, the observed level of labor productivity tends to decline. Why?
A) The total product remains the same during the recovery, but the number of workers declines.
B) The total product increases during the recovery, but the number of workers declines.
C) The marginal product of labor declines as new workers enter the expanding work force.
D) The marginal product of labor increases at a slower rate than the decline in employment.

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Multiple Choice

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Essay

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Essay

Q 58Q 58

A bakery operating in the short run has found that when the level of employment in its baking room was increased from 4 to 10, in increments of one, its corresponding levels of production of bread were a. Calculate the marginal product of labor.
b. Explain whether this production function exhibits diminishing marginal productivity of labor.

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Essay

Q 59Q 59

The production function of pizzas for One Guy's Pizza shop is K represents the number of ovens One Guy's Pizza uses and is fixed in the short-run at 4 ovens. L represents the number of labor hours One Guy's Pizza employees and is variable in the short and long-run. Fill in the empty columns in the table below.

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Essay

Q 60Q 60

The production function for Cogswell Cogs is K represents the number of robot hours used in the production process while L represents the number of labor hours. The marginal productivity of a labor hour is Fill in the empty columns in the table below. Use the information in the table to sketch Cogswell's marginal product of labor curve while robot hours are fixed at 9.

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Essay

Q 61Q 61

Tad's Baitshop currently uses no computers in determining inventory. The number of items that can be inventoried in a day is given by where L is the number of labor hours used. If Tad purchases a computer to be used for inventory purposes, the number of items that can be inventoried in a day becomes Use the information in the table below to sketch Tad's marginal product of labor curves before and after the use of the computer for inventory purposes.

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Essay

Q 62Q 62

Trisha's Fashion Boutique production function for dresses is y(K, L) = , where K is the number of sewing machines and L is the amount of labor hours employed. Trisha pays $15 per labor hour and sells each dress for $87.50. Also, Trisha currently has 4 sewing machines. Fill in the table below. How many units of labor will Trisha employ before the value of the marginal product of labor is less than the cost of a labor hour?

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Essay

Q 63Q 63

Sarah's Pretzel Plant produces pretzels according to the function K is the number of ovens, and L is the number of labor hours Sarah uses to produce her pretzels. At the moment, Sarah uses 9 ovens. Also, she plans to hire 64 labor hours. Sarah can sell each unit of pretzels produced for $3.50. Fill in the table below. If Sarah increased her use of labor hours to 65, would the value of the marginal product of labor exceed the wage rate of $8.50?

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Essay

Q 64Q 64

Laura's Internet Services firm can design computer systems according to the function where K is the amount of gigabyte storage she has available and L is the amount of labor hours she employs. Currently, Laura has 125 gigabytes of storage. Sketch the change in the marginal product of labor curve for Laura's firm for values of if she increases her gigabyte storage capacity to 216.

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Essay

Q 65Q 65

An isoquant:
A) must be linear.
B) cannot have a negative slope.
C) is a curve that shows all the combinations of inputs that yield the same total output.
D) is a curve that shows the maximum total output as a function of the level of labor input.
E) is a curve that shows all possible output levels that can be produced at the same cost.

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Multiple Choice

Q 66Q 66

If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called:
A) the total product.
B) an isoquant.
C) the average product.
D) the marginal product.
E) none of the above

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Multiple Choice

Q 67Q 67

Figure 6.3.1
-Refer to Figure 6.3.1 above. The ability to produce output in this isoquant map shows:
A) increasing marginal returns.
B) diminishing marginal returns.
C) constant returns to both labor and capital.
D) negative returns to both labor and capital.

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Multiple Choice

Q 68Q 68

Figure 6.3.1
-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.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

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Multiple Choice

Q 69Q 69

A firm uses two factors of production. Irrespective of how much of each factor is used, both factors always have positive marginal products which imply that:
A) isoquants are relevant only in the long run.
B) isoquants have negative slope.
C) isoquants are convex.
D) isoquants can become vertical or horizontal.
E) none of the above

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Multiple Choice

Q 70Q 70

Use the following statements to answer this question. I. The numerical labels attached to indifference curves are meaningful only in an ordinal way.
II) The numerical labels attached to isoquants are meaningful only in an ordinal way.
A) both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) both I and II are false.

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Multiple Choice

Q 71Q 71

The function which shows combinations of inputs that yield the same output is called a(n):
A) isoquant curve.
B) isocost curve.
C) production function.
D) production possibilities frontier.

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Multiple Choice

Q 72Q 72

Two isoquants, which represent different output levels but are derived from the same production function, cannot cross because:
A) isoquants represent different utility levels.
B) this would violate a technical efficiency condition.
C) isoquants are downward sloping.
D) additional inputs will not be used by profit maximizing firms if those inputs decrease output.
E) Both B and D are true.

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Multiple Choice

Q 73Q 73

An upward sloping isoquant:
A) can be derived from a production function with one input.
B) can be derived from a production function that uses more than one input where reductions in the use of any input always reduces output.
C) cannot be derived from a production function when a firm is assumed to maximize profits.
D) can be derived whenever one input to production is available at zero cost to the firm.
E) none of the above

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Multiple Choice

Q 74Q 74

Use the following two statements to answer this question: I. If the marginal product of labor is zero, the total product of labor is at its maximum.
II If the marginal product of labor is at its maximum, the average product of labor is falling.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

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Multiple Choice

Q 75Q 75

As we move downward along a typical isoquant, the slope of the isoquant:
A) becomes flatter.
B) becomes steeper.
C) remains constant.
D) becomes linear.

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Multiple Choice

Q 76Q 76

The rate at which one input can be reduced per additional unit of the other input, while holding output constant, is measured by the:
A) marginal rate of substitution.
B) marginal rate of technical substitution.
C) slope of the isocost curve.
D) average product of the input.

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Multiple Choice

Q 77Q 77

If capital is measured on the vertical axis and labor is measured on the horizontal axis, the slope of an isoquant can be interpreted as the:
A) rate at which the firm can replace capital with labor without changing the output rate.
B) average rate at which the firm can replace capital with labor without changing the output rate.
C) marginal product of labor.
D) marginal product of capital.

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Multiple Choice

Q 78Q 78

The marginal rate of technical substitution is equal to the:
A) slope of the total product curve.
B) change in output minus the change in labor.
C) change in output divided by the change in labor.
D) ratio of the marginal products of the inputs.

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Multiple Choice

Q 79Q 79

If the isoquants are straight lines, then:
A) inputs have fixed costs at all use rates.
B) the marginal rate of technical substitution of inputs is constant.
C) only one combination of inputs is possible.
D) there are constant returns to scale.

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Multiple Choice

Q 80Q 80

A production function in which the inputs are perfectly substitutable would have isoquants that are:
A) convex to the origin.
B) L-shaped.
C) linear.
D) concave to the origin.

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Multiple Choice

Q 81Q 81

Figure 6.3.2
-Refer to Figure 6.3.2 above. An examination of the production isoquants in the diagram below reveals that:
A) capital and labor must be used in fixed proportions.
B) capital and labor are perfectly substitutable.
C) the isoquants have a constant MRTS.
D) Both B and C are correct.
E) none of the above

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Multiple Choice

Q 82Q 82

Figure 6.3.3
-Refer to Figure 6.3.3 above. An examination of the production isoquants in the diagram below reveals that:
A) capital and labor will be used in fixed proportions.
B) capital and labor are perfectly substitutable.
C) the MRTS is constant.
D) Both B and C are correct.
E) none of the above

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Multiple Choice

Q 83Q 83

Figure 6.3.4
-Refer to Figure 6.3.4 above. The diagram below shows an isoquant for the production of wheat. Which point has the highest marginal productivity of labor?
A) Point A
B) Point B
C) Point C
D) Point D

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Multiple Choice

Q 84Q 84

Which of the following is NOT related to the slope of isoquants?
A) The fact that inputs have positive marginal product
B) The fact that inputs have diminishing marginal product
C) The fact that input prices are positive
D) The fact that more of either input increases output
E) The fact that there are diminishing returns to inputs

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Multiple Choice

Q 85Q 85

The marginal rate of technical substitution is equal to:
A) the absolute value of the slope of an isoquant.
B) the ratio of the marginal products of the inputs.
C) the ratio of the prices of the inputs.
D) all of the above
E) A and B only

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Multiple Choice

Q 86Q 86

A firm's marginal product of labor is 4 and its marginal product of capital is 5. If the firm adds one unit of labor, but does not want its output quantity to change, the firm should:
A) use five fewer units of capital.
B) use 0.8 fewer units of capital.
C) use 1.25 fewer units of capital.
D) add 1.25 units of capital.

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Multiple Choice

Q 87Q 87

A straight-line isoquant:
A) is impossible.
B) would indicate that the firm could switch from one output to another costlessly.
C) would indicate that the firm could not switch from one output to another.
D) would indicate that capital and labor cannot be substituted for each other in production.
E) would indicate that capital and labor are perfect substitutes in production.

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Multiple Choice

Q 88Q 88

An L-shaped isoquant:
A) is impossible.
B) would indicate that the firm could switch from one output to another costlessly.
C) would indicate that the firm could not switch from one output to another.
D) would indicate that capital and labor cannot be substituted for each other in production.
E) would indicate that capital and labor are perfect substitutes in production.

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Multiple Choice

Q 89Q 89

If the isoquants in an isoquant map are downward sloping but bowed away from the origin (i.e., concave to the origin), then the production technology violates the assumption of:
A) technical efficiency.
B) free disposal.
C) diminishing marginal returns.
D) positive average product.

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Multiple Choice

Q 90Q 90

The MRTS for isoquants in a fixed-proportion production function is:
A) zero or one.
B) always zero.
C) always one.
D) zero or undefined.

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Multiple Choice

Q 91Q 91

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.
A) labor, capital
B) capital, labor
C) concrete, gravel
D) none of the above

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Multiple Choice

Q 92Q 92

Which of the following examples represents a fixed-proportion production system with capital and labor inputs?
A) Clerical staff and computers
B) Airplanes and pilots
C) Horse-drawn carriages and carriage drivers
D) all of the above

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Multiple Choice

Q 93Q 93

You are currently using three printing presses and five employees to print 100 sales manuals per hour. If the MRTS at this point is 0.5 (capital is on the vertical axis of the isoquant map), then you would be willing to exchange ________ employees for one more printing press in order to maintain current output.
A) zero
B) one
C) two
D) three

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Multiple Choice

Q 94Q 94

For Figure 6.9 in the book, MRTS = K/(4L) with capital (K) on the vertical axis of the isoquant map. Suppose L=100 hours and K=400 machine hours at the current level of output. How much additional labor is required to maintain output if we reduce capital by one machine hour?
A) One hour
B) Two hours
C) Three hours
D) Four hours

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Multiple Choice

Q 95Q 95

Suppose the production of long-distance airline flights is described by a fixed proportion production process in which three crew members (i.e., labor) are required for each aircraft (i.e., capital). If the airline operates with four crew members per plane, then we know that:
A) the production process violates diminishing margin returns.
B) production at this point is technically inefficient.
C) the isoquants for this production process are upward sloping.
D) the airline will have negative profits.

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Multiple Choice

Q 96Q 96

Joe's Organic Cereal Company produces granola breakfast cereal under a fixed proportion production system in which 22 ounces of cereal are packaged in each cardboard box. However, the plant production manager decides to reduce the amount of cereal per box to 20.5 ounces at the start of the next year. For the isoquant map, cereal is plotted in the vertical axis, and boxes are on the horizontal axis. What happens to the curves in the isoquant map as a result of this change?
A) Shift upward
B) Shift downward
C) Shift rightward
D) Shift leftward

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Multiple Choice

Q 97Q 97

You are given the following table for a production process which has two variable outputs. a. Sketch the isoquants corresponding to the following output levels: 60, 70, 85, 95, 105, and 115. What returns to scale does the production function exhibit? What can be said of the MRTS?
b. Analyze the marginal productivity of labor and capital for the production function.

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Essay

Q 98Q 98

The production function for Spacely Sprockets is K represents the number of robot hours used in the production process while L represents the number of labor hours. Using the information in the table below, sketch representative Isoquants for Spacely's production process.

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Q 99Q 99

Figure 6.4.1
-Refer to Figure 6.4.1 above. According to the diagram below, where each isoquant's output level is marked to the right of the isoquant, production is characterized by:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) increasing, constant and decreasing returns to scale.

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Multiple Choice

Q 100Q 100

Figure 6.4.1
-In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) negative returns to scale.

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Multiple Choice

Q 101Q 101

Increasing returns to scale in production means:
A) more than 10% as much of all inputs are required to increase output 10%.
B) less than twice as much of all inputs are required to double output.
C) more than twice as much of only one input is required to double output.
D) isoquants must be linear.

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Multiple Choice

Q 102Q 102

With increasing returns to scale, isoquants for unit increases in output become:
A) farther and farther apart.
B) closer and closer together.
C) the same distance apart.
D) none of these.

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Multiple Choice

Q 103Q 103

Use the following two statements to answer this question: I. "Decreasing returns to scale" and "diminishing returns to a factor of production" are two phrases that mean the same thing.
II Diminishing returns to all factors of production implies decreasing returns to scale.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

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Multiple Choice

Q 104Q 104

Figure 6.4.2
-Refer to Figure 6.4.2 above. The situation pictured is one of:
A) constant returns to scale, because the line through the origin is linear.
B) decreasing returns to scale, because the isoquants are convex.
C) decreasing returns to scale, because doubling inputs results in less than double the amount of output.
D) increasing returns to scale, because the isoquants are convex.
E) increasing returns to scale, because doubling inputs results in more than double the amount of output.

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Multiple Choice

Q 105Q 105

Figure 6.4.2
-Refer to Figure 6.4.2 above. The situation pictured in Figure 6.4.2:
A) is one of increasing marginal returns to labor.
B) is one of increasing marginal returns to capital.
C) is consistent with diminishing marginal product.
D) contradicts the law of diminishing marginal product.
E) shows decreasing returns to scale.

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Multiple Choice

Q 106Q 106

Figure 6.4.3
-Refer to Figure 6.4.3. The situation pictured is one of:
A) constant returns to scale, because the line through the origin is linear.
B) decreasing returns to scale, because the isoquants are convex.
C) decreasing returns to scale, because doubling inputs results in less than double the amount of output.
D) increasing returns to scale, because the isoquants are convex.
E) increasing returns to scale, because doubling inputs results in more than double the amount of output.

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Multiple Choice

Q 107Q 107

The situation pictured in Figure 6.4.3 above:
A) is one of increasing marginal returns to labor.
B) is one of increasing marginal returns to capital.
C) is not consistent with diminishing marginal product of labor or capital.
D) shows constant returns to scale.
E) shows diminishing marginal products of labor and capital.

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Multiple Choice

Q 108Q 108

A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function This production function exhibits:
A) decreasing returns to scale for all output levels.
B) constant returns to scale for all output levels.
C) increasing returns to scale for all output levels.
D) no clear pattern of returns to scale.

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Multiple Choice

Q 109Q 109

If input prices are constant, a firm with increasing returns to scale can expect:
A) costs to double as output doubles.
B) costs to more than double as output doubles.
C) costs to go up less than double as output doubles.
D) to hire more and more labor for a given amount of capital, since marginal product increases.
E) to never reach the point where the marginal product of labor is equal to the wage.

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Multiple Choice

Q 110Q 110

A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function This production function exhibits:
A) decreasing returns to scale for all output levels.
B) constant returns to scale for all output levels.
C) increasing returns to scale for all output levels.
D) no clear pattern of returns to scale.

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Multiple Choice

Q 111Q 111

Consider the following statements when answering this question: I. If a technology exhibits diminishing returns then it also exhibits decreasing return to scale.
II) If a technology exhibits decreasing returns to scale then it also exhibits diminishing returns.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

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Multiple Choice

Q 112Q 112

The textbook discusses the carpet industry situated in the southeastern U.S., and the authors indicate that smaller carpet mills have ________ returns to scale while larger mills have ________ returns to scale.
A) increasing, decreasing
B) increasing, constant
C) constant, decreasing
D) constant, increasing

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Multiple Choice

Q 113Q 113

Which scenario below would lead to lower profits as we double the inputs used by the firm?
A) Increasing returns to scale with constant input prices
B) Constant returns to scale with constant input prices
C) Constant returns to scale with rising input prices (perhaps because the firm is not a price-taker in the input markets)
D) all of the above

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Multiple Choice

Q 114Q 114

Which of the following production functions exhibits constant returns to scale?
A) q = KL
B) q = KL

^{0.5}C) q = K + L D) q = log(KL)Free

Multiple Choice

Q 115Q 115

Does it make sense to consider the returns to scale of a production function in the short run?
A) Yes, this is an important short-run characteristic of production functions.
B) Yes, returns to scale determine the diminishing marginal returns of the inputs.
C) No, returns to scale is a property of the consumer's utility function.
D) No, we cannot change all of the production inputs in the short run.

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Multiple Choice

Q 116Q 116

Use the following statements to answer this question: I. We cannot measure the returns to scale for a fixed-proportion production function.
II) Production functions with inputs that are perfect substitutes always exhibit constant returns to scale.
A) I and II are true.
B) I is true and II is false.
C) II is true and I is false.
D) I and II are false.

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Multiple Choice

Q 117Q 117

In Example 6.5 in the book, the authors use the observed production data from the U.S. carpet industry to show that small firms likely have constant returns to scale and that large firms likely have increasing returns to scale. Are returns to scale in this industry likely to continue increasing as these firms become even larger?
A) Yes, the marginal products of labor and capital are known to be positive at all levels of output in the U.S. carpet industry, which implies continued increasing returns to scale.
B) Yes, increasing returns are always observed in other countries that produce carpeting on large scale.
C) No, the authors predict that returns to scale in carpet production will likely decline at some point.
D) The authors do not provide any comments on this issue.

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Multiple Choice

Q 118Q 118

Why do firms tend to experience decreasing returns to scale at high levels of output?
A) Firms face more problems with coordinating tasks and communications among managers and workers at very high levels of output.
B) Government tax policy tends to discourage large-scale production operations.
C) Firms face fewer problems with inventory management and marketing as output reaches very high levels.
D) Firms tend to use more capital and less labor at higher levels of output.

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Multiple Choice

Q 119Q 119

Many mining and mineral extraction processes tend to exhibit increasing returns to scale. Suppose copper mines have increasing returns, and the existing copper mines reduce their capital and labor inputs by 25 percent in response to a global recession. What is the expected impact on copper output?
A) Output increases by less than 25 percent.
B) Output decreases by less than 25 percent.
C) Output decreases by exactly 25 percent.
D) Output decreases by more than 25 percent.

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Multiple Choice

Q 120Q 120

Bridget's Brewery production function is given by where K is the number of vats she uses and L is the number of labor hours. Does this production process exhibit increasing, constant or decreasing returns to scale? Holding the number of vats constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used?

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Essay

Q 121Q 121

Michael's Dairy farm production function is given by where K is the number of machine milkers and L is the amount of labor hours he uses. Does this production function exhibit increasing, constant or decreasing returns to scale? Holding the number of machine milkers constant at 16, is the marginal product of labor increasing, constant or decreasing as more labor is used?

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Q 122Q 122

Leann's Telecommunication firm production function is given by where K is the number of internet servers and L is the number of labor hours she uses. Does this production function exhibit increasing, constant or decreasing returns to scale? Holding the number of internet servers constant at 8, is the marginal product of labor increasing, constant or decreasing as more labor is used?

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Q 123Q 123

Homer's boat manufacturing plant production function is where K is the number of hydraulic lifts and L is the number of labor hours he employs. Does this production function exhibit increasing, decreasing or constant returns to scale? At the moment, Homer uses 20,000 labor hours and 50 hydraulic lifts. Suppose that Homer can use any amount of either input without affecting the market costs of the inputs. If Homer increased his use of labor hours and hydraulic lifts by 10%, how much would his production increase? Increasing the use of both inputs by 10% will result in Homer's costs increasing by exactly 10%. If Homer increases his use of all inputs by 10%, what will increase more, his production or his costs? Given that Homer can sell as many boats as he produces for $75,000, does his profits go up by 10% with a 10% increase in input use?

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Essay

Q 124Q 124

Marge's Hair Salon production function is where K is the number of hair dryers and L is the number of labor hours she employs. Does this production function exhibit increasing, decreasing, or constant returns to scale? At the moment, Marge uses 16 labor hours and 16 hair dryers. Suppose that Marge can use any amount of either input without affecting the market costs of the inputs. If Marge increased her use of labor hours and hair dryers by 10%, how much would her production increase? Increasing the use of both inputs by 10% will result in Marge's costs increasing by exactly 10%. If Marge increases her use of all inputs by 10%, what will increase more, her production or her costs? Given that Marge earns $12.50 for each unit produced, do her profits go up or down when she increases her input use by 10%?

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Essay

Q 125Q 125

Apu's Squishy production function is where K is the number of squishy machines and L is the number of labor hours he employs. Does this production function exhibit increasing, decreasing or constant returns to scale? At the moment, Apu uses 2 squishy machines and 4 labor hours. Suppose that Apu can use any amount of either input without affecting the market costs of the inputs. If Apu increased his use of labor hours and squishy machines by 100%, how much would his production increase? Increasing the use of both inputs by 100% will result in Apu's costs increasing by exactly 100%. If Apu increases his use of all inputs by 100%, what will increase more his production or his costs? Given that Apu can sell as many squishies as he produces for $1.00, do his profits go up or down when he increases his input use by 100%?

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