Question 1

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)  Q = Na + Cl 
B)  Q = Na x Cl 
C)  Q = min(Na, Cl) 
D)  Q = max(Na, Cl) 
A)  Q = Na + Cl 
B)  Q = Na x Cl 
C)  Q = min(Na, Cl) 
D)  Q = max(Na, Cl)

Question 2

Identify the truthfulness of the following statements. 
I. 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.
II. The production function identifies the technically feasible combinations of inputs.

Accepted Answer

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

Question 3

A fixed proportions production function

Accepted Answer

A)  is not observed in practice. 
B)  has straight line isoquants. 
C)  has L-shaped isoquants. 
D)  has a constant marginal rate of technical substitution as the firm substitutes labor for capital. 
A)  is not observed in practice. 
B)  has straight line isoquants. 
C)  has L-shaped isoquants. 
D)  has a constant marginal rate of technical substitution as the firm substitutes labor for capital.

Question 4

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the $MR T S_{L ,K}$=
 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 5

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 6

Let a firm's production function be $Q = 100 ( a L + b K )$ The production function then becomes $Q = 500 ( a L + b K )$ Which of the following statements is true?

Accepted Answer

A)  Neutral technological progress has occurred. 
B)  Labor-saving technological progress has occurred 
C)  Capital-saving technological progress has occurred. 
D)  Economies of scale have increased. 
A)  Neutral technological progress has occurred. 
B)  Labor-saving technological progress has occurred 
C)  Capital-saving technological progress has occurred. 
D)  Economies of scale have increased.

Question 7

An isoquant represents

Accepted Answer

A)  all combinations of inputs that produce a given level of output at the same cost. 
B)  all combinations of inputs that produce a given level of output. 
C)  all combinations of output that require the same levels of inputs. 
D)  all combinations of inputs that cost the same amount. 
A)  all combinations of inputs that produce a given level of output at the same cost. 
B)  all combinations of inputs that produce a given level of output. 
C)  all combinations of output that require the same levels of inputs. 
D)  all combinations of inputs that cost the same amount.

Question 8

Identify the truthfulness of the following statements. I. When the marginal product of labor is falling, the average product of labor is falling.
II) When the marginal product curve lies above the average product curve, then average product is rising.

Accepted Answer

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

Question 9

The production function $Q ( L , K , M ) = 25 K ^ { 0.5 } L ^ { 0.5 } M ^ { 0 .5 }$ 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.

Question 10

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.

Question 11

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 12

When isoquants are convex to the origin,

Accepted Answer

A)  the marginal rate of technical substitution is inverted. 
B)  the marginal rate of technical substitution is decreasing. 
C)  the marginal rate of technical substitution is constant. 
D)  the marginal rate of technical substitution is increasing. 
A)  the marginal rate of technical substitution is inverted. 
B)  the marginal rate of technical substitution is decreasing. 
C)  the marginal rate of technical substitution is constant. 
D)  the marginal rate of technical substitution is increasing.

Question 13

Holding labor constant at 2 units, the average productivity of three units of capital is

Accepted Answer

A)  8. 
B)  12. 
C)  21. 
D)  24. 
A)  8. 
B)  12. 
C)  21. 
D)  24.

Question 14

Average product reaches a maximum when labor equals

Accepted Answer

A)  100 
B)  200 
C)  300 
D)  400 
A)  100 
B)  200 
C)  300 
D)  400

Question 15

Which one of these is false when compared to the relationship between marginal and average product?

Accepted Answer

A)  When average product is increasing in labor, marginal product is greater than average product. That is, if APL increases in L, then MPL > APL. 
B)  When average product is decreasing in labor, marginal product is less than average product. That is, if APL decreases in L, then MPL L. 
C)  The relationship between MPL and APL is not the same as the relationship between the marginal of anything and the average of anything. 
D)  When average product neither increases nor decreases in labor because we are at a point at which APL is at a maximum, then marginal product is equal to average product. 
A)  When average product is increasing in labor, marginal product is greater than average product. That is, if APL increases in L, then MPL > APL. 
B)  When average product is decreasing in labor, marginal product is less than average product. That is, if APL decreases in L, then MPL L. 
C)  The relationship between MPL and APL is not the same as the relationship between the marginal of anything and the average of anything. 
D)  When average product neither increases nor decreases in labor because we are at a point at which APL is at a maximum, then marginal product is equal to average product.

Question 16

Consider the CES production function $Q = \left[ 3 L ^ { 67 } + 3 K ^ { 67 } \right] ^ { 15 }$ . The elasticity of substitution is

Accepted Answer

A)  0.3 
B)  1.5 
C)  0.67 
D)  3.00 
A)  0.3 
B)  1.5 
C)  0.67 
D)  3.00

Question 17

The expression given below explains:

Accepted Answer

A)  Product hill 
B)  Marginal product of labor 
C)  Non-marginal product 
D)  Total product 
A)  Product hill 
B)  Marginal product of labor 
C)  Non-marginal product 
D)  Total product

Question 18

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 19

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies

Accepted Answer

A)  the isoquants corresponding to any particular level of output will shift outward from the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will increase. 
B)  the isoquants corresponding to any particular level of output will shift outward from the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will decrease. 
C)  the isoquants corresponding to any particular level of output will shift inward toward the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will increase. 
D)  the isoquants corresponding to any particular level of output will shift inward toward the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will decrease. 
A)  the isoquants corresponding to any particular level of output will shift outward from the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will increase. 
B)  the isoquants corresponding to any particular level of output will shift outward from the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will decrease. 
C)  the isoquants corresponding to any particular level of output will shift inward toward the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will increase. 
D)  the isoquants corresponding to any particular level of output will shift inward toward the origin and the $MR T S_{L ,K}$=
 along any ray from the origin will decrease.

Question 20

Assuming a firm uses capital and labor to produce output, which of the following is not always a true statement?

Accepted Answer

A)  Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to greater output. 
B)  Assuming the marginal products of labor and capital are less than zero, doubling the inputs of capital and labor will lead to less output. 
C)  Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to double the output. 
D)  Assuming the marginal products of labor and capital are greater than zero, doubling the input of capital and keeping the input of labor constant will lead to greater output. 
A)  Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to greater output. 
B)  Assuming the marginal products of labor and capital are less than zero, doubling the inputs of capital and labor will lead to less output. 
C)  Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to double the output. 
D)  Assuming the marginal products of labor and capital are greater than zero, doubling the input of capital and keeping the input of labor constant will lead to greater output.

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

A fixed proportions production function

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the $MR T S_{L ,K}$ = decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing

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

Let a firm's production function be $Q = 100 ( a L + b K )$ The production function then becomes $Q = 500 ( a L + b K )$ Which of the following statements is true?

An isoquant represents

Identify the truthfulness of the following statements. I. When the marginal product of labor is falling, the average product of labor is falling. II) When the marginal product curve lies above the average product curve, then average product is rising.

The production function $Q ( L , K , M ) = 25 K ^ { 0.5 } L ^ { 0.5 } M ^ { 0 .5 }$ exhibits

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

Identify the true statement.

When isoquants are convex to the origin,

Holding labor constant at 2 units, the average productivity of three units of capital is

Average product reaches a maximum when labor equals

Which one of these is false when compared to the relationship between marginal and average product?

Consider the CES production function $Q = \left[ 3 L ^ { 67 } + 3 K ^ { 67 } \right] ^ { 15 }$ . The elasticity of substitution is

The expression given below explains:

Diminishing marginal returns occur when the total product function is

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies

Assuming a firm uses capital and labor to produce output, which of the following is not always a true statement?

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

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Exam 6: Inputs and Production Functions

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

A fixed proportions production function

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the MRTSL,KMR T S_{L ,K}MRTSL,K​ = decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing

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

Let a firm's production function be Q=100(aL+bK)Q = 100 ( a L + b K )Q=100(aL+bK) The production function then becomes Q=500(aL+bK)Q = 500 ( a L + b K )Q=500(aL+bK) Which of the following statements is true?

An isoquant represents

Identify the truthfulness of the following statements. I. When the marginal product of labor is falling, the average product of labor is falling. II) When the marginal product curve lies above the average product curve, then average product is rising.

The production function Q(L,K,M)=25K0.5L0.5M0.5Q ( L , K , M ) = 25 K ^ { 0.5 } L ^ { 0.5 } M ^ { 0 .5 }Q(L,K,M)=25K0.5L0.5M0.5 exhibits

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

Identify the true statement.

When isoquants are convex to the origin,

Holding labor constant at 2 units, the average productivity of three units of capital is

Average product reaches a maximum when labor equals

Which one of these is false when compared to the relationship between marginal and average product?

Consider the CES production function Q=[3L67+3K67]15Q = \left[ 3 L ^ { 67 } + 3 K ^ { 67 } \right] ^ { 15 }Q=[3L67+3K67]15 . The elasticity of substitution is

The expression given below explains:

Diminishing marginal returns occur when the total product function is

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies

Assuming a firm uses capital and labor to produce output, which of the following is not always a true statement?

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

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the $MR T S_{L ,K}$ = decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing

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

Let a firm's production function be $Q = 100 ( a L + b K )$ The production function then becomes $Q = 500 ( a L + b K )$ Which of the following statements is true?

The production function $Q ( L , K , M ) = 25 K ^ { 0.5 } L ^ { 0.5 } M ^ { 0 .5 }$ exhibits

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

Consider the CES production function $Q = \left[ 3 L ^ { 67 } + 3 K ^ { 67 } \right] ^ { 15 }$ . The elasticity of substitution is