Question 1

The general rule for allocating a productive resource efficiently across different production activities of the same product, like fishing boats in the text case example, is to choose the allocation for which the

Accepted Answer

The most efficient allocation of a productive resource across different production activities of the same product is achieved when the marginal product of the resource is the same in every activity. This means that the additional output produced by the last unit of the resource used in each activity is the same. If this condition is not met, reallocating the resource can increase total output without increasing the usage of the resource. Allocating the resource where the marginal product is highest would lead to the maximum total output.

Question 2

For production functions with decreasing returns to scale, a proportional increase in output

Accepted Answer

CFor production functions with decreasing returns to scale, a more-than-proportional growth in all inputs is required to achieve a proportional increase in output, which is a characteristic of diminishing returns. This means as more inputs are used, the additional output generated from those inputs decreases.

Question 3

In conceptual production functions, technological change is

Accepted Answer

The answer of In conceptual production functions, technological change is
...

Question 4

On an isoquant, the MRTS is defined as

Accepted Answer

MRTS (Marginal Rate of Technical Substitution) is defined as the rate at which one input can be substituted for another input without changing the level of output. At any point on the isoquant, MRTS is equal to the slope of the isoquant, which is given by MPK/MPL. Therefore, the correct answer is B.

Question 5

On this chapter quiz for this course you can study for up to four hours. If you don't study at all you will get a 70. One hour would give you an 80, the second hour increased your score to 89, the third to 92. If you studied the fourth hour your score would be 87. In which hour did diminishing returns set in?

Accepted Answer

Diminishing returns set in during the second hour because the increase in score from the first to the second hour (9 points) is less than the increase from not studying to studying for one hour (10 points).

Question 6

If the owner of an ice-cream stand told a student looking for summer work that he would not hire him even if he worked for nothing, we can infer that

Accepted Answer

The owner's statement suggests that even if the student worked for free, his labor would not be productive enough to bring in any additional revenue, leading to a marginal product of labor that is zero or less.

Question 7

Returns to scale refers to

Accepted Answer

Returns to scale describe the relationship between the proportionate increase in inputs and the proportionate increase in output. When all inputs are changed in the same proportion, returns to scale can be classified as constant returns to scale, increasing returns to scale, or decreasing returns to scale. Option A describes the law of variable proportions, option B describes total fixed inputs, and option D describes a specific phenomenon within the law of variable proportions.

Question 8

When the marginal product curve lies below the average product curve,

Accepted Answer

When the marginal product curve (MP) lies below the average product curve (AP), it means that the additional output produced by each additional unit of input (MP) is less than the total output divided by the total input (AP). This implies that the AP is declining because the MP is pulling it down. Therefore, the correct answer is A. Option B is incorrect because it is possible for the total product curve (TP) to continue rising even when the MP is below the AP. Options C and D are also incorrect because they do not follow from the given information.

Question 9

The isoquant mapping for perfect complements in production is

Accepted Answer

Isoquant mapping for perfect complements in production is L-shaped, reflecting the fixed proportion in which the inputs must be used.

Question 10

From an isoquant map, one can illustrate diminishing returns to production by

Accepted Answer

The answer of From an isoquant map, one can illustrate...

Question 11

For any constant returns production function, the isoquants for Q = 1, Q = 2, Q = 3, etc. will

Accepted Answer

In a constant returns to scale production function, doubling the inputs will double the output, so the isoquants are equally spaced.

Question 12

Say you are the owner of a Pizza place. You know that when you produce 10 pizzas, the average product of each of your workers is 10, and the marginal product of your last worker is 15. From this information you know that

Accepted Answer

Since the marginal product of the last worker (15) is higher than the average product (10) before that worker was hired, it means the average product is increasing. This is because the addition of the last worker has resulted in a higher output per worker on average.

Question 13

Suppose you are using 10 units of labor in your short-run production process. At this point, the average product of your labor is 10, and the marginal product of the last unit of labor was 14. Given this, we know that the

Accepted Answer

Since the marginal product of the last unit of labor (14) is greater than the average product of labor (10), it means that the addition of the last unit of labor has increased the average output per unit of labor, indicating that the average product of labor is increasing.

Question 14

Which of the following statements about isoquant maps is true?

Accepted Answer

The answer of Which of the following statements about isoquant...

Question 15

The rate at which one input can be exchanged for another without altering output is called

Accepted Answer

The concept described in the question is known as the Marginal Rate of Technical Substitution (MRTS), which measures the rate at which one input can be substituted for another while keeping output constant. Option A is not correct as the slope of the total product curve measures the rate of change of output with respect to changes in the total amount of inputs used. Option C is incorrect because the slope of the marginal product of labor provides information about the rate at which output changes in response to employing an additional unit of labor. Option D describes a concept related to production, but it refers to the point beyond which increasing amounts of labor can result in decreasing marginal returns, rather than the rate of input substitution.

Question 16

If the contribution to output of an additional unit of the variable input exceeds the average contribution of the variable inputs used,

Accepted Answer

If the contribution to output of an additional unit of the variable input exceeds the average contribution of the variable inputs used, it means that the marginal product of the variable input is greater than the average product. This will cause the average product to rise, as the overall output is increasing at a faster rate than the amount of input used, leading to a higher contribution per unit of input. Therefore, choice A is the best answer.

Question 17

A production function for which proportional changes in all inputs leads to a more-than-proportional change in output is said to exhibit

Accepted Answer

A production function exhibiting increasing returns to scale implies that a given percentage increase in inputs will result in a more-than-proportional percentage increase in output. Therefore, D is the correct choice.

Question 18

Say you own a Mexican place that produces, among other things, Mexican burritos. Your production of burritos is given by the equation Q = 6KL2, where Q is the amount of burritos, K is the amount of capital and L is the amount of labor. How many workers would you need to use in order to minimize the cost of producing 100 burritos when the capital is, K, is 20?

Accepted Answer

The answer of Say you own a Mexican place that...

Question 19

Suppose that at a firm's current level of production the marginal product of capital is equal to 10 units, while the marginal rate of technical substitution between capital and labor is 2. Given this, we know the marginal product of labor must be

Accepted Answer

The answer of Suppose that at a firm's current level...

Question 20

Say you own a Mexican place that produces, among other things, Mexican burritos. The marginal product of your last worker was 5. If the marginal rate of technical substitution between capital and labor is 0.5, then marginal product of capital is

Accepted Answer

The marginal rate of technical substitution (MRTS) represents the amount of capital that can be replaced by one unit of labor while keeping the level of output constant. In this case, the MRTS is 0.5, which means that to replace one unit of labor, we need to increase the amount of capital by 0.5 units.

If the marginal product of labor is 5, then to maintain the same level of output, the marginal product of capital must be half of that, which is 2.5. However, since we need to increase the amount of capital by 0.5 units to replace one unit of labor, we can simply multiply 2.5 by 2, giving us a marginal product of capital of 5 x 2 = 10. Therefore, the answer is A) 10.

Quiz 8: Production