Question 1

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Accepted Answer

An isoquant is a curve that represents all the combinations of capital and labor that result in the production of a given level of output, making it the correct choice.

Question 2

If the marginal product of labor is less than the average product of labor, then the average product of labor is increasing.

Accepted Answer

When the marginal product of labor is less than the average product of labor, the average product of labor is actually decreasing, not increasing. This is because the marginal product is the additional output from one more unit of labor, and if it's less than the average, it pulls the average down.

Question 3

One worker produces 5 rocking chairs. To produce 10 rocking chairs it will be necessary to hire more than two workers, if diminishing returns have set in.

Accepted Answer

If diminishing returns have set in, each additional worker contributes less to production than the previous one, so more than two workers would be needed to produce 10 rocking chairs.

Question 4

Costs of production are determined

Accepted Answer

Costs of production are determined by both the technologies that are available and by the input prices, as technology affects efficiency and productivity, while input prices affect the cost of materials and labor.

Question 5

Related to the Economics in Practice on page 155: Suppose you own a truck and use it to deliver merchandise to retailers and hire a driver to make such deliveries. At higher rates of speed the truck gets fewer miles per gallon of gas. Holding all else constant, as the price of gasoline continues to rise

Accepted Answer

As the price of gasoline rises, it becomes more costly to operate the truck for deliveries. Since the truck gets fewer miles per gallon at higher speeds, instructing the driver to drive slower can improve fuel efficiency, thereby reducing the cost per delivery in terms of fuel consumption. This is a way to mitigate the impact of rising gasoline prices on operating costs.

Question 6

Factors of production such as labor and capital

Accepted Answer

Factors of production like labor and capital can be complements in some contexts (where the use of one increases the productivity of the other) and substitutes in others (where one can be used in place of the other).

Question 7

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

Accepted Answer

Diminishing marginal returns occur when adding an additional factor of production results in a smaller increase in output. In this case, both workers are producing at the same rate without a decrease in productivity, indicating diminishing marginal returns have not set in.

Question 8

Related to the Economics in Practice on page 154: According to the Economics in Practice feature, productivity of the firms participating in the United States Technical Assistance and Productivity Program

Accepted Answer

The productivity of the firms participating in the United States Technical Assistance and Productivity Program grew by 15 percent in the first year and continued to grow for more than a decade afterward.

Question 9

A firm's isocost line shifts parallel outward from the original isocost line as its

Accepted Answer

An isocost line represents all combinations of capital and labor that a firm can purchase for a given total cost. When the total cost for capital and labor increases, the firm can afford more of both inputs, causing the isocost line to shift outward.

Question 10

Related to the Economics in Practice on page 155: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?

Accepted Answer

The best analysis involves balancing the concerns of speed and fuel efficiency to minimize total expenses. Driving too fast increases fuel consumption and costs, while driving too slowly reduces the number of deliveries that can be made. The optimal speed is one that balances these factors to reduce overall costs.

Question 11

Related to the Economics in Practice on page 155: You own a truck and use it to deliver merchandise to retailers and hire a driver to make such deliveries. The speed at which you instruct the driver to drive depends on

Accepted Answer

The speed at which you instruct the driver to drive would depend on both the driver's wage and the price of gasoline. A higher wage might incentivize faster delivery to maximize the number of deliveries within a paid period, while higher gasoline prices might encourage slower driving to improve fuel efficiency and reduce costs.

Question 12

A firm's isocost line shifts parallel inward from the original isocost line as its

Accepted Answer

An isocost line represents all combinations of capital and labor that a firm can purchase for a given total cost. If the isocost line shifts parallel inward, it means the firm has less money to spend on capital and labor, indicating a decrease in total cost for capital and labor.

Question 13

A production function shows the greatest amount that a firm will produce given the amount of labor input.

Accepted Answer

A production function shows the maximum output that a firm can produce with a given amount of labor input.

Question 14

The flexibility of a firm's techniques of production is an important determinant of its costs.

Accepted Answer

The flexibility of a firm's production techniques can significantly impact its ability to adapt to changes in demand, utilize new technologies, and optimize production processes, all of which can lead to cost reductions and increased efficiency.

Question 15

If the first worker produces ten custom picture frames a day, and the second worker produces twelve additional custom picture frames a day, then diminishing marginal returns have not yet set in.

Accepted Answer

Diminishing marginal returns refer to a decrease in the incremental output of a production process as the amount of a single factor of production is incrementally increased, holding all other factors constant. The scenario described does not indicate a decrease in output per worker, but rather shows their individual production rates, hence diminishing marginal returns have not been demonstrated.

Question 16

One worker produces 10 rocking chairs. If diminishing returns have already set in, a firm will need to hire more than two workers to produce 20 rocking chairs.

Accepted Answer

Diminishing returns imply that adding an additional worker results in less output per worker, so more than two workers would be needed to double production if diminishing returns have set in.

Question 17

A production function shows the least amount that a firm will produce given the amount of labor input.

Accepted Answer

A production function shows the maximum output that a firm can produce given a certain amount of inputs (like labor and capital), not the least amount.

Question 18

The additional output that can be produced by adding one additional unit of a specific input is called marginal product.

Accepted Answer

Marginal product refers to the increase in output resulting from a one-unit increase in the amount of a particular input, holding all other inputs constant.

Question 19

Related to the Economics in Practice on page 155: Which of the following would be most likely to make it more efficient for delivery trucks to drive more quickly?

Accepted Answer

An increase in the hourly wage of truck drivers makes their time more expensive, incentivizing quicker deliveries to minimize labor costs. A decrease in the cost of gasoline lowers the expense of operating vehicles at higher speeds, making it more cost-effective to drive faster.

Question 20

A key decision that all firms make is which technology to use in the production of their products.

Accepted Answer

Firms must decide on the most efficient and cost-effective technology for producing their products to remain competitive and meet market demands.

Quiz 7: The Production Process: the Behavior of Profit-Maximizing Firms