Deck 8: The Discovery of Production and Its Technology

Question 1

The no free lunch assumption states that you cannot get any output from a production process without inputs.

Answer 1

True

Question 2

The rate at which one input can be substituted for another while keeping the output produced constant is the marginal rate of

A) technical substitution
B) substitution
C) transformation

Answer 2

technical substitution

Question 3

The short run is the time period during which at least one factor of production is fixed.

Answer 3

True

Question 4

The assumption that states that, if an input combination y is a feasible input combination, then so is λy where 0 ≤λ≤ 1is known as theλ

A) additivity assumption
B) divisibility assumption
C) convexity assumption

Question 5

The marginal rate of technical substitution measures the ratio between the resulting change in the output level and the proportionate change in the levels of all the inputs.

Question 6

The production function that allows the producer to vary the levels of some, but not all inputs in an effort to produce a given quantity is called the short-run production function.

Question 7

The assumption that states that, if there is a production activity y that produces a certain amount of output z using capital and labor in particular amounts and another activity w that produces the same quantity using different amounts of these inputs, then we can always produce at least z by mixing these activities and using y a fraction of the time and w a fraction of the time is known as the

A) additivity assumption
B) divisibility assumption
C) convexity assumption

Question 8

Decreasing returns to scale is a feature of a technology that is such that, when all inputs are increased by a fixed multiple λ, output increases by less than that multiple.

Question 9

A production function is a function the describes the __________ amouint of _________ a producer can produce given a certain level of _________.

A) minimum, output, inputs
B) maximum, input, outputs
C) maximum, output, inputs

Question 10

A factor of production whose level cannot be adjusted in the time period under investigation is a fixed factor of production.

Question 11

The assumption that states that, if we can produce a cetain output with a given combination of inputs, then with those inputs we can always produce strictly less is called the subtractivity assumption.

Question 12

A return that is just sufficient to recover an entrepreneur's opportunity cost is known as

A) opportunity profit
B) extra-normal profit
C) normal profit

Question 13

Any return above the normal profit to an entrepreneur is known as

A) opportunity cost
B) extra-normal profit
C) free lunch

Question 14

An production indifference curve is the set of bundles that most efficiently produce the same output given a production function.

Question 15

The assumption that states that, if we can produce an output of x using one combination of inputs and another level of output of y using another combination of these inputs, then we can feasibly produce the output x + y is known as the

A) additivity assumption
B) divisibility assumption
C) convexity assumption

Question 16

The assumption that states that you cannot run a production process in reverse is called the

A) no free lunch assumption
B) nonreversibility assumption
C) divisibility assumption

Question 17

The marginal product curve represents how much output we get at different levels of labor inputs holding capital fixed at a given level.

Question 18

Technology is

A) the set of constraints on production defining how one can combine or convert inputs into outputs
B) a return that is just sufficient to recover an entrepreneur's opportunity cost
C) a concept that has no effect on production

Question 19

Opportunity cost is measured by the amount of money spent to perform any activity.

Question 20

The amount by which output would increase if we added one more unit of capital to production, holding all other inputs fixed is called the

A) average product of capital
B) marginal product of labor
C) marginal product of capital

Question 21

The increase in the amount of output produced that results when we add one more unit of labor, but hold all other inputs constant is called

A) the marginal product of labor
B) decreasing returns to factor
C) a long-run production function

Question 22

(a)

(b)

(c)

Refer to Exhibit 8-1. Which graph depicts decreasing returns to scale?

A) (a)
B) (b)
C) (c)

Question 23

A period of time long enough to vary all factors of production is known as the

A) long run
B) immediate run
C) short run

Question 24

An example of a total product curve is how much output we get at different levels of

A) labor inputs holding capital fixed at a given level
B) capital inputs holding labor fixed at a given level
C) Both answers are correct

Question 25

Refer to Exhibit 8-2. The curve shown most likely depicts

A) long-run production
B) short-run production
C) marginal product

Question 26

(a)

(b)

(c)

Refer to Exhibit 8-1. Which graph depicts increasing returns to scale?

A) (a)
B) (b)
C) (c)

Question 27

As you are taking this test, which period of economic time is your professor functioning in to produce the service economic education?

Question 28

The long-run production function allows the producer to vary the levels of _____ inputs in an effort to produce a given quantity.

A) some
B) all
C) no

Question 29

A variable factor of production is a factor of production whose level

A) of quality is not standardized
B) can be adjusted
C) cannot be adjusted in the time period under investigation

Question 30

If all inputs are doubled and the resulting output increases by less than a factor of two, the technology features

A) increasing returns to scale
B) decreasing returns to scale
C) constant returns to scale

Question 31

The elasticity of substitution is a measure of

A) the percentage change in the demand for a good that results from a given percentage change in its price
B) how easy it is to substitute one input for another in producing a given level of output
C) how much output decreases when inputs are increased by a fixed multiple λ

Question 32

The decrease in the rate that output grows when we increase the usage of one factor, but hold the usage of all others constant is known as

A) decreasing returns to factor
B) decreasing returns to scale
C) elasticity of substitution

Question 33

Refer to Exhibit 8-3. This graph most likely illustrates which type of production function?

Question 34

(a)
(b)
(c)
Refer to Exhibit 8-1. Describe the returns to scale for each graph. Explain your answers.

Question 35

If all inputs are doubled and so is the resulting output, the technology features

A) increasing returns to scale
B) decreasing returns to scale
C) constant returns to scale

Question 36

Why is normal profit the minimum amount that an entrepreneur must earn in order to keep the business operating?

Question 37

Describe some similarities between the theory of the producer and the theory of the consumer.

Question 38

(a)

(b)

(c)

Refer to Exhibit 8-1. Which graph depicts constant returns to scale?

A) (a)
B) (b)
C) (c)

Question 39

A period of time so short that producers are unable to vary any of their inputs to meet changes in demand or other changes is called the

A) short run
B) momentary run
C) immediate run

Question 40

If all inputs are doubled and the resulting output increases by more than a factor to two, the technology features

A) increasing returns to scale
B) decreasing returns to scale
C) constant returns to scale