# Quiz 5: Production

Business

Q 1Q 1

What does a firm's production function show?
A)The production function indicates the maximum level of output the firm can produce for any combination of inputs.
B)The production function shows the least-cost combination of inputs that can be used to produce a given level of output.
C)The production function shows the average cost associated with the production of various levels of output.
D)The production function shows the profit-maximizing level of output that can be produced with a given level of inputs.
E)The production function shows the marginal cost of producing an extra unit of output by employing an extra unit of an input.

Free

Multiple Choice

A

Q 2Q 2

The short-run is best defined as the time period in which _____.
A)all inputs to production can be varied
B)the amount of output cannot be varied
C)one or more inputs to production are fixed
D)the marginal cost of production is low
E)all inputs to production remain fixed

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Multiple Choice

C

Q 3Q 3

Which of the following is true in the long-run?
A)A firm can vary all the inputs used in production.
B)A firm can vary only one of the inputs used in production.
C)All inputs used in production are fixed in the long-run.
D)The level of output produced cannot be varied.
E)In the long-run the marginal cost of production is zero.

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Multiple Choice

A

Q 4Q 4

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.What is the marginal product of the 5th worker?
A)9 units
B)2 units
C)8 units
D)6 units
E)11 units

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Multiple Choice

Q 5Q 5

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.Diminishing returns to labor occurs beyond _____ workers.
A)4
B)3
C)5
D)9
E)8

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Multiple Choice

Q 6Q 6

Which of the following correctly defines the marginal product of labor?
A)It is the additional output produced by an additional unit of labor,all other factors held constant.
B)It is the additional output produced by a proportionate increase in capital and labor,the demand for the product held constant.
C)It is the additional labor required to produce one additional unit of output,other inputs held constant.
D)It is calculated as the total output divided by the total units of labor employed in production.
E)It is the addition to total cost from employing an additional unit of labor.

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Multiple Choice

Q 7Q 7

The marginal product of labor initially rises as more labor is employed because of:
A)division and specialization of labor.
B)constant returns to scale.
C)total factor productivity.
D)an increase in profits from the additional output produced.
E)a fall in the cost of hiring additional labor.

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Multiple Choice

Q 8Q 8

What does the law of diminishing marginal returns state?
A)When all inputs to production are increased in equal proportions,output will eventually decrease.
B)When one input is increased,with all other inputs unchanged,the marginal product of the input will eventually decline.
C)When one input is held constant,and all other inputs are increased,output will eventually decrease.
D)When one input is increased,and all other inputs are held constant,output will increase at an increasing rate.
E)When all inputs to production are increased in equal proportions,the addition to output will increase at an increasing rate.

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Multiple Choice

Q 9Q 9

When the marginal product of a variable input is zero,it implies that the firm is at the point where the total product is:
A)increasing at an increasing rate.
B)also equal to zero.
C)at its maximum.
D)decreasing at an increasing rate.
E)increasing at a decreasing rate.

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Multiple Choice

Q 10Q 10

The marginal revenue product of labor [MRPL] is equal to the product of:
A)the marginal product of labor and the quantity of labor employed.
B)the wage rate and the marginal product of labor.
C)the wage rate and marginal revenue per unit of output
D)marginal product of labor and total revenue of the firm.
E)the marginal revenue per unit of output and the marginal product of labor

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Multiple Choice

Q 11Q 11

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.What is the total revenue that accrues to the firm when it employs 4 workers?
A)$36
B)$112
C)$100
D)$60
E)$82

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Multiple Choice

Q 12Q 12

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.When the firm employs _____ workers,marginal profit per unit of output is at its maximum.
A)7
B)5
C)6
D)3
E)9

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Multiple Choice

Q 13Q 13

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.What is the marginal revenue product of the 4th worker?
A)$96
B)$242
C)$288
D)$162
E)$256

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Multiple Choice

Q 14Q 14

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.The marginal profit per worker is at its maximum when _____ workers are employed.
A)7
B)8
C)4
D)5
E)3

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Multiple Choice

Q 15Q 15

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.What is the marginal revenue associated with the 2nd worker?
A)$22
B)$24
C)$20
D)$32
E)0

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Multiple Choice

Q 16Q 16

The following table shows the total output produced in a factory at various levels of employment of labor.The firm sells each unit of output at $2 and each worker is paid a wage of $32.
Table 5-1
-Refer to Table 5-1.How many workers should the firm employ in order to maximize profit?
A)8
B)7
C)4
D)5
E)6

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Multiple Choice

Q 17Q 17

A profit-maximizing firm will hire the variable input,labor,until the point where:
A)marginal product of labor is equal to the marginal revenue product of capital.
B)marginal revenue from each unit of output is equal to the wage rate.
C)marginal revenue product of labor is equal to the marginal cost of labor.
D)marginal revenue product of labor is equal to zero.
E)marginal product of labor equals the marginal revenue from each unit of output.

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Multiple Choice

Q 18Q 18

Firm X sells output at a price of $8 per unit and pays labor [L] a wage of $20 per hour.The marginal product of labor is given by: MPL = 7 - 0.1L.To maximize profit,the firm should utilize _____ hours of labor.
A)75
B)80
C)85
D)90
E)95

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Multiple Choice

Q 19Q 19

When a firm faces constant returns to scale,a proportionate increase in all inputs:
A)will keep output constant.
B)will increase output by the same proportion as the increase in inputs.
C)will lead to a decline in the cost of production.
C)will result in a higher-than-proportionate increase in output.
E)will not change the total costs of production.

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Multiple Choice

Q 20Q 20

Which of the following is true of a firm that faces increasing returns to scale?
A)An increase in the quantity of one input will increase output by a greater proportion.
B)As the quantity of all inputs are increased,the average cost of production will increase.
C)A given increase in the quantity of all inputs will increase output by a greater proportion.
D)As the quantity of one input is increased,its marginal product will increase at an increasing rate.
E)As the quantity of one input is increased,the marginal cost of production will decline.

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Multiple Choice

Q 21Q 21

Output elasticity is the percentage change in output that results from a 1 percent increase _____.
A)in all the inputs
B)in the price of an input
C)in the price of the final product
D)in the marginal revenue product of a variable input
E)in the marginal product of an input

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Multiple Choice

Q 22Q 22

If there is a change in input prices,what is the most likely impact on production isoquants?
A)They will shift leftward toward the origin.
B)The curvature of the isoquant will change.
C)They will remain unchanged.
D)They will shift outward away from the origin.
E)Uncertain,depends on which input prices change.

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Multiple Choice

Q 23Q 23

Which of the following correctly describes a production isoquant?
A)An isoquant is a curve that shows all possible combinations of inputs that can produce a given level of output.
B)An isoquant is a curve that shows the least-cost combinations of inputs that can produce a given level of output.
C)An isoquant is a curve that shows all possible combinations of inputs that are used to produce various levels of output.
D)An isoquant is a curve that shows all possible levels of output that can be produced in the short-run using one variable input.
E)An isoquant is a curve that shows all possible levels of output that can be produced at various input price levels.

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Multiple Choice

Q 24Q 24

The slope of an isocost line shows:
A)the ratio of the marginal revenue product of the inputs.
B)the ratio of marginal product of the inputs.
C)the marginal rate of technical substitution.
D)the ratio of the input prices.
E)the output elasticity of production.

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Multiple Choice

Q 25Q 25

Which of the following identifies the optimal usage of inputs by a profit-maximizing firm?
A)Marginal product of labor = marginal product of capital = 0
B)Marginal product of labor/price of labor = marginal product of capital/price of capital
C)Marginal revenue product of labor = marginal revenue product of capital
D)Marginal cost of labor = marginal cost of capital
E)Marginal product of labor/marginal product of capital = price of capital/price of labor

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Multiple Choice

Q 26Q 26

If a production function is expressed in a linear form,the inputs used in the production process:
A)are perfect complements.
B)are perfect substitutes.
C)have to be increased in the same proportion.
D)have fixed marginal costs.
E)have equal marginal productivity.

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Multiple Choice

Q 27Q 27

Which of the following is true of fixed-proportions production?
A)The inputs used in production have constant marginal products.
B)An increase in the price of an input will lead the firm to substitute away from it.
C)The inputs used in production display diminishing marginal returns.
D)The inputs used in production are perfect complements.
E)The marginal cost of the inputs used in production is fixed.

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Multiple Choice

Q 28Q 28

Given that L = labor and K = capital,which of the following production functions displays decreasing returns to scale?
A)Q = aL + bK

^{2}B)Q = aL + bK + c C)Q = bLK D)Q = cL^{0.2}K^{0.5}E)Q = cL^{2}K^{5}Free

Multiple Choice

Q 29Q 29

If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2,the production function exhibits:
A)increasing returns to scale.
B)constant returns to scale.
C)diminishing marginal returns.
D)declining productivity.
E)increasing average costs.

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Multiple Choice

Q 30Q 30

When a profit-maximizing firm undertakes production in more than one plant,it will allocate a fixed level of inputs such that _____ is equal across plants.
A)the total product
B)the marginal cost of production
C)the marginal product
D)the average product
E)the marginal revenue product

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Multiple Choice

Q 31Q 31

A factory produces product A according to the production function QA = 100XA,where XA denotes the amount of input and QA is the quantity produced.It also produces product B according to the production function QB = 200XB + XB2,where XB denotes the amount of input and QB is the quantity produced.The total available amount of input X is 100 units.The firm's profit-maximizing allocation of input X is _____.
A)X

_{A}= 60 and X_{B}= 40 B)X_{A}= 50 and X_{B}= 50 C)X_{A}= 0 and X_{B}= 100 D)X_{A}= 100 and X_{B}= 0 E)X_{A}= 45 and X_{B}= 55Free

Multiple Choice

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Q 33Q 33

Suppose that management increases the size of its plant.What is the most likely impact on total and marginal products of the other inputs? How will this affect usage of the variable inputs?

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Q 34Q 34

Carefully explain why the marginal product of labor first rises and then falls as use of labor increases.In which portion of the marginal product of labor curve will the firm typically produce?

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Q 36Q 36

Explain how the optimal usage of the variable input,labor,will change in response to the following changes in the short-run:
(a)A drop in the price of the good or service that the firm sells

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Q 37Q 37

Dirt Diggers (DD)is a firm that excavates roadside ditches to lay drainpipe.Its output follows the production function: Q = 10L - 0.1L2,where L denotes labor hours and Q the length of the ditch in meters.The firm hires labor at a wage of $12 per hour.DD has received an offer to excavate 250 meters for a price of $500.Should it accept the offer? Suppose DD is offered as much or as little excavation work as it desires at a price of $2.00 per meter,what is the optimal quantity that it should choose to excavate?

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Q 39Q 39

Carefully define marginal rate of technical substitution.What are the assumptions on the basis of which it is calculated?

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Q 40Q 40

For the Cobb-Douglass production function: Q = cLαKβ derive the marginal rate of technical substitution?

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Q 41Q 41

Carefully explain the condition that the firm should follow if it wishes to produce at least cost in the long run.

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Q 42Q 42

Specialty Steel has carefully measured production in its new plant to determine whether it is technically efficient in production.It has found that,for its two inputs K and L,it has the following marginal products: MPK = 15 units and MPL = 22 units.The inputs are hired in perfectly competitive markets,and the firm faces input costs of PK = $7.50 and PL = $10 per unit.
You have been hired as a consultant to assist Specialty in increasing profitability.What do you recommend about production planning? Explain.

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Essay

Q 43Q 43

A firm has carefully estimated its production function to be: Q = K0.55L0.45,where Q = units of output,K = units of capital,and L = units of labor.What is output elasticity in this case? What sort of returns to scale does the firm face? Explain.

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Q 44Q 44

Standale Plastics produces plastic dustpans,using a semi-automated system of five machines to produce pans.The amount of labor to tend the machines,repair,adjust input flows,and remove completed pans,is variable,and output tends to follow the formula:
Q = 300L

^{0.6},where Q = units of output produced per day and L = number of daily workers. (a)Compute the total product per day and the marginal product of labor for the first five workers.Free

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Q 45Q 45

A firm produces a good in two factories: one in Tucson and one in Phoenix.Historically,the plants' long-run average costs have been comparable.Engineers have found that output elasticity at the Tucson plant is 1.1,while at Phoenix it is 0.93.A senior production manager has recommended expanding the scale of production in Tucson over the next few years and cutting production in Phoenix.Examine the validity of this proposal.

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Q 46Q 46

A firm produces according to the following production function: Q = K0.25L0.75,where Q = units of output,K = units of capital,and L = units of labor.Suppose that the price of K is $4 per unit,and the price of L is $6 per unit.What is the optimal capital/labor ratio?

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Q 47Q 47

Assume that a firm employs labor and capital by paying $40 per unit of labor employed and $200 per hour to rent a unit of capital.Given that the production function is given by: Q = 10L - L2 + 60K -1.5K2,where Q is total output,L is labor,and K is capital,what is the firm's optimal combination of capital and labor?

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Q 48Q 48

Ranger Construction is preparing to repair potholes,under contract to the local county road repair agency.Based on past experience,Ranger has found that output can be described by: Q = K0.5L0.5,where Q = pot holes filled,K = units of capital,and L = units of labor.Ranger can hire labor at $12 per hour,and the cost of capital is $8 per unit.Capacity limitations require that Ranger accepts no more than $96,000 worth of filling this season.What is the optimal mix of inputs for Ranger? How many potholes should Ranger agree to fill? Use the method of Lagrange multipliers to find the solution.

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Q 49Q 49

Crew Brew produces a popular brand of beer in its mini-brewery located on a small river in Wisconsin.It uses a special formula,combined with the fresh water from the local stream,to produce a drink popular with local folks and tourists who visit during the summer fishing season,and autumn deer hunting season.The production function of Crew follows the formula:
Q = 50K + 50L,where Q = barrels of beer,K = units of capital,and L = units of labor.
(a)Suppose that capital can be purchased for $8 per unit,and labor costs $6 per unit.What is the optimal combination of inputs for the firm to employ?

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Q 50Q 50

Enpar manufactures engine parts for an automotive manufacturer.It operates two plants,A and B,which have the following production functions: QA = 30SA - 0.25SA2 and QB = 40SB - 0.5SB2,where QA and QB denote the outputs of engine parts from each plant and SA and SB denote the amounts of steel used in each plant.Suppose that total steel availability is 40 units.What is the optimal allocation of steel between the two plants?

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Q 51Q 51

Sleak Teak builds yard furniture,using domestic hardwoods and (in a smaller shop)handcrafted knick-knacks from the same sort of wood.Although hardwoods were readily available in the past,recently they have been much more difficult to obtain.Consultation with the plant managers of the two lines has resulted in the following production functions for hardwood usage in the two products:
Yard furniture: Y = 2T

_{Y}- 0.001T_{Y}^{2}Knick-knack: K = 20T_{K}- 0.01T_{K}^{2}, where Y and K denote units of the two types of products and T_{Y}and T_{K}denote teak used in yard furniture and knick-knacks respectively.Yard furniture can be sold at a profit of $100 per unit,and knick-knacks can be sold at a profit of $25 each.Sleak Teak has 1,300 units of teak available.How should it be allocated across the two products? Explain.Free

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