Question 1

The region of upward sloping backward bending isoquants is:

Accepted Answer

A) Economic region of production 
B) Uneconomic region of production 
C) Marginal rate of production 
D) Marginal rate of technical substitution 
A) Economic region of production 
B) Uneconomic region of production 
C) Marginal rate of production 
D) Marginal rate of technical substitution B

Question 2

Consider the CES production function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$. This production function exhibits:

Accepted Answer

A) decreasing returns to scale. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) either decreasing or constant returns to scale, but more information is needed to determine which one. 
A) decreasing returns to scale. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) either decreasing or constant returns to scale, but more information is needed to determine which one. B

Question 3

The production function $Q = K L$ exhibits:

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) undefined returns to scale. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) undefined returns to scale. A

Question 4

Identify the true statement.

Accepted Answer

A) Decreasing returns to scale and diminishing marginal returns are just two different ways of saying the same thing. 
B) Returns to scale pertains to the impact on output of increasing all inputs simultaneously; diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant. 
C) Returns to scale pertains to the impact on output of changing a single input while holding all other inputs constant; diminishing marginal returns pertains to the impact on output of increasing all inputs simultaneously. 
D) Returns to scale can be identified by calculating the slope of an isoquant. 
A) Decreasing returns to scale and diminishing marginal returns are just two different ways of saying the same thing. 
B) Returns to scale pertains to the impact on output of increasing all inputs simultaneously; diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant. 
C) Returns to scale pertains to the impact on output of changing a single input while holding all other inputs constant; diminishing marginal returns pertains to the impact on output of increasing all inputs simultaneously. 
D) Returns to scale can be identified by calculating the slope of an isoquant.

Question 5

The Cobb-Douglas production function is given by the general formula $\mathrm { Q } = \mathrm { AL } ^ { \alpha } \mathrm { K } ^ { \beta }$ and the constant elasticity of substitution is equal to 1 .

Accepted Answer

A) True 
 B)False

Question 6

When a production function can be expressed as $$Q = \min \{ a K , B L \}$$ ,the relationship between capital and labor in the production function is that:

Accepted Answer

A) capital and labor are perfect substitutes, and the isoquants are linear. 
B) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped. 
C) capital and labor are easily substituted, and the isoquants are convex to the origin. 
D) capital and labor are perfect substitutes, and the isoquants are L-shaped. 
A) capital and labor are perfect substitutes, and the isoquants are linear. 
B) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped. 
C) capital and labor are easily substituted, and the isoquants are convex to the origin. 
D) capital and labor are perfect substitutes, and the isoquants are L-shaped.

Question 7

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

Accepted Answer

A) marginal product curve. 
B) average product curve. 
C) marginal rate of technical substitution. 
D) law of diminishing marginal productivity. 
A) marginal product curve. 
B) average product curve. 
C) marginal rate of technical substitution. 
D) law of diminishing marginal productivity.

Question 8

For the production function $Q = a K + b L$, where the variables are graphed as usual, the equation for a typical isoquant is_____

Accepted Answer

A)  $K = \frac { Q - b L } { a }$ 
B)  $L = \frac { Q - a K } { b }$ 
C)  $K = \frac { Q ^ { 2 } } { L }$ 
D)  $K = a Q - b L$ 
A)  $K = \frac { Q - b L } { a }$ 
B)  $L = \frac { Q - a K } { b }$ 
C)  $K = \frac { Q ^ { 2 } } { L }$ 
D)  $K = a Q - b L$

Question 9

The law of diminishing marginal returns states that:

Accepted Answer

A) when the marginal product is above the average product, average product must be increasing. 
B) when the marginal product is below the average product, average product must be decreasing. 
C) as the use of one input increases holding the quantities of the other inputs fixed, the marginal product of the input eventually declines. 
D) as the use of all inputs increases, the marginal product of the inputs eventually declines. 
A) when the marginal product is above the average product, average product must be increasing. 
B) when the marginal product is below the average product, average product must be decreasing. 
C) as the use of one input increases holding the quantities of the other inputs fixed, the marginal product of the input eventually declines. 
D) as the use of all inputs increases, the marginal product of the inputs eventually declines.

Question 10

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing:

Accepted Answer

A) neutral technological progress. 
B) labor-saving technological progress. 
C) capital-saving technological progress. 
D) both labor-saving and capital-saving technological progress. 
A) neutral technological progress. 
B) labor-saving technological progress. 
C) capital-saving technological progress. 
D) both labor-saving and capital-saving technological progress.

Question 11

The production set represents:

Accepted Answer

A) the set of all technically feasible combinations of inputs and outputs. 
B) the technically efficient combinations of inputs and outputs. 
C) the maximum output the firm can produce from a given level of inputs. 
D) the minimum amounts of inputs necessary to produce a given level of output. 
A) the set of all technically feasible combinations of inputs and outputs. 
B) the technically efficient combinations of inputs and outputs. 
C) the maximum output the firm can produce from a given level of inputs. 
D) the minimum amounts of inputs necessary to produce a given level of output.

Question 12

If capital cannot easily be substituted for labor, then the elasticity of substitution is:

Accepted Answer

A) negative. 
B) close to zero. 
C) close to one. 
D) approaching infinity. 
A) negative. 
B) close to zero. 
C) close to one. 
D) approaching infinity.

Question 13

Given the simple production function $\mathrm { Q } = 3 \mathrm {~K} + 4 \mathrm {~L}$, where $\mathrm { L }$ is the quantity of labor employed and $\mathrm { K }$ is the quantity of capital employed, assuming $\mathrm { K } = 2$ and $\mathrm { L } = 3$, what would it mean if output was less than 18 ?

Accepted Answer

A) The firm is out of business. 
B) The firm is not employing labor and capital efficiently. 
C) The production function was not specified correctly. 
D) Labor is less productive than capital. 
A) The firm is out of business. 
B) The firm is not employing labor and capital efficiently. 
C) The production function was not specified correctly. 
D) Labor is less productive than capital.

Question 14

Returns to scale can be identified by calculating the slope of an isoquant.

Accepted Answer

A) True 
 B)False

Question 15

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

Accepted Answer

A) True 
 B)False

Question 16

The marginal rate of technical substitution in production is analogous to the marginal rate of substitution for the consumer's optimization problem in that the slope is equal in both instances.

Accepted Answer

A) True 
 B)False

Question 17

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:

Accepted Answer

A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) undefined returns to scale. 
A) increasing returns to scale. 
B) constant returns to scale. 
C) decreasing returns to scale. 
D) undefined returns to scale.

Question 18

Consider a production function $Q = 3 K + 4 L$, when $L$ is graphed on the $x$-axis and $K$ is graphed on the $y$-axis, the marginal rate of technical substitution is equal to:

Accepted Answer

A)  $4 / 3$ and the isoquant is convex to the origin. 
B)  $4 / 3$ and the isoquant is a straight line. 
C)  $3 / 4$ and the isoquant is a straight line. 
D)  12 and the isoquant is convex to the origin. 
A)  $4 / 3$ and the isoquant is convex to the origin. 
B)  $4 / 3$ and the isoquant is a straight line. 
C)  $3 / 4$ and the isoquant is a straight line. 
D)  12 and the isoquant is convex to the origin.

Question 19

Diminishing marginal returns occur when the total product function is:

Accepted Answer

A) decreasing. 
B) increasing at a decreasing rate. 
C) increasing at a constant rate. 
D) increasing at an increasing rate. 
A) decreasing. 
B) increasing at a decreasing rate. 
C) increasing at a constant rate. 
D) increasing at an increasing rate.

Question 20

Suppose every molecule of salt requires exactly one sodium atom, Na, and one chlorine atom, Cl. The production function that describes this is:

Accepted Answer

A)  $\mathrm { Q } = \mathrm { Na } + \mathrm { Cl }$ 
B)  $\mathrm { Q } = \mathrm { Na } \times \mathrm { Cl }$ 
C)  $Q = \min ( \mathrm { Na } , \mathrm { Cl } )$ 
D)  $Q = \max ( \mathrm { Na } , \mathrm { Cl } )$ 
A)  $\mathrm { Q } = \mathrm { Na } + \mathrm { Cl }$ 
B)  $\mathrm { Q } = \mathrm { Na } \times \mathrm { Cl }$ 
C)  $Q = \min ( \mathrm { Na } , \mathrm { Cl } )$ 
D)  $Q = \max ( \mathrm { Na } , \mathrm { Cl } )$

The region of upward sloping backward bending isoquants is:

Consider the CES production function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ . This production function exhibits:

The production function $Q = K L$ exhibits:

Identify the true statement.

The Cobb-Douglas production function is given by the general formula $\mathrm { Q } = \mathrm { AL } ^ { \alpha } \mathrm { K } ^ { \beta }$ and the constant elasticity of substitution is equal to 1 .

When a production function can be expressed as $Q = \min \{ a K , B L \}$ ,the relationship between capital and labor in the production function is that:

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

For the production function $Q = a K + b L$ , where the variables are graphed as usual, the equation for a typical isoquant is_____

The law of diminishing marginal returns states that:

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing:

The production set represents:

If capital cannot easily be substituted for labor, then the elasticity of substitution is:

Returns to scale can be identified by calculating the slope of an isoquant.

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

The marginal rate of technical substitution in production is analogous to the marginal rate of substitution for the consumer's optimization problem in that the slope is equal in both instances.

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:

Consider a production function $Q = 3 K + 4 L$ , when $L$ is graphed on the $x$ -axis and $K$ is graphed on the $y$ -axis, the marginal rate of technical substitution is equal to:

Diminishing marginal returns occur when the total product function is:

Suppose every molecule of salt requires exactly one sodium atom, Na, and one chlorine atom, Cl. The production function that describes this is:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 6: Inputs and Production Functions

The region of upward sloping backward bending isoquants is:

Consider the CES production function Q=[aLσ−1σ+bKσ−1σ]σσ−1Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }Q=[aLσσ−1​+bKσσ−1​]σ−1σ​ . This production function exhibits:

The production function Q=KLQ = K LQ=KL exhibits:

Identify the true statement.

The Cobb-Douglas production function is given by the general formula Q=ALαKβ\mathrm { Q } = \mathrm { AL } ^ { \alpha } \mathrm { K } ^ { \beta }Q=ALαKβ and the constant elasticity of substitution is equal to 1 .

When a production function can be expressed as Q=min⁡{aK,BL}Q = \min \{ a K , B L \}Q=min{aK,BL} ,the relationship between capital and labor in the production function is that:

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

For the production function Q=aK+bLQ = a K + b LQ=aK+bL , where the variables are graphed as usual, the equation for a typical isoquant is_____

The law of diminishing marginal returns states that:

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing:

The production set represents:

If capital cannot easily be substituted for labor, then the elasticity of substitution is:

Returns to scale can be identified by calculating the slope of an isoquant.

Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.

The marginal rate of technical substitution in production is analogous to the marginal rate of substitution for the consumer's optimization problem in that the slope is equal in both instances.

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits:

Consider a production function Q=3K+4LQ = 3 K + 4 LQ=3K+4L , when LLL is graphed on the xxx -axis and KKK is graphed on the yyy -axis, the marginal rate of technical substitution is equal to:

Diminishing marginal returns occur when the total product function is:

Suppose every molecule of salt requires exactly one sodium atom, Na, and one chlorine atom, Cl. The production function that describes this is:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Consider the CES production function $Q = \left[ a L ^ { \frac { \sigma - 1 } { \sigma } } + b K ^ { \frac { \sigma - 1 } { \sigma } } \right] ^ { \frac { \sigma } { \sigma - 1 } }$ . This production function exhibits:

The production function $Q = K L$ exhibits:

The Cobb-Douglas production function is given by the general formula $\mathrm { Q } = \mathrm { AL } ^ { \alpha } \mathrm { K } ^ { \beta }$ and the constant elasticity of substitution is equal to 1 .

When a production function can be expressed as $Q = \min \{ a K , B L \}$ ,the relationship between capital and labor in the production function is that:

For the production function $Q = a K + b L$ , where the variables are graphed as usual, the equation for a typical isoquant is_____

Consider a production function $Q = 3 K + 4 L$ , when $L$ is graphed on the $x$ -axis and $K$ is graphed on the $y$ -axis, the marginal rate of technical substitution is equal to: