Homework 6

1) Use the following two statements to answer this question:

I. Production functions describe what is technically feasible when the firm operates
efficiently.
II. The production function shows the least cost method of producing a given level of
output.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

2) The short run is

A) less than a year.
B) three years.
C) however long it takes to produce the planned output.
D) a time period in which at least one input is fixed.
E) a time period in which at least one set of outputs has been decided upon.

3) Joe owns a small coffee shop, and his production function is q = 3KL where q is total
output in cups per hour, K is the number of coffee machines (capital), and L is the
number of employees hired per hour (labor). If Joe's capital is currently fixed at K=3
machines, what is his short-run production function?
A) q = 3L

B) q = 3L2
C) q = 9L

D) q = 3K2

4) Writing total output as Q, change in output as Q, total labor employment as L, and
change in labor employment as L, the marginal product of labor can be written
algebraically as
A) Q ∙ L.
B) Q / L.
C) ΔL / ΔQ.
D) ΔQ / ΔL.

5) The slope of the total product curve is the

A) average product.
B) slope of a line from the origin to the point.
C) marginal product.
D) marginal rate of technical substitution.
6) The marginal product of an input is
A) total product divided by the amount of the input used to produce this amount of
output.
B) the addition to total output that adds nothing to total revenue.
C) the addition to total output that adds nothing to profit.
D) the addition to total output due to the addition of one unit of all other inputs.
E) the addition to total output due to the addition of the last unit of an input, holding all
other inputs constant.

7) When the average product is decreasing, marginal product

A) equals average product.
B) is increasing.
C) exceeds average product.
D) is decreasing.
E) is less than average product.

8) According to the law of diminishing returns

A) the total product of an input will eventually be negative.
B) the total product of an input will eventually decline.
C) the marginal product of an input will eventually be negative.
D) the marginal product of an input will eventually decline.
E) none of the above

9) Use the following two statements to answer this question:

I. The marginal product of labor is the slope of the line from the origin to the total
product curve at that level of labor usage.
II The average product of labor is the slope of the line that is tangent to the total
product curve at that level of labor usage.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

10) At a given level of labor employment, knowing the difference between the average
product of labor and the marginal product of labor tells you
A) whether increasing labor use raises output.
B) whether increasing labor use changes the marginal product of labor.
C) whether economies of scale exist.
D) whether the law of diminishing returns applies.
E) how increasing labor use alters the average product of labor.

11) You operate a car detailing business with a fixed amount of machinery (capital), but
you have recently altered the number of workers that you employ per hour. Three
employees can generate an average product of 4 cars per person in each hour, and five
employees can generate an average product of 3 cars per person in each hour. What is
the marginal product of labor as you increase the labor from three to five employees?
A) MP = 3 cars
B) MP = 1.5 cars
C) MP = 15 cars
D) MP = -1 cars

12) Joe owns a coffee house and produces coffee drinks under the production function q
= 5KL where q is the number of cups generated per hour, K is the number of coffee
machines (capital), and L is the number of employees hired per hour (labor). What is
the average product of labor?
A) AP = 5
B) AP = 5K
C) AP = 5L
D) AP = 5K/L

13) Complete the following table:

14) A bakery operating in the short run has found that when the level of employment in
its baking room was increased from 4 to 10, in increments of one, its corresponding
levels of production of bread were 110, 115, 122, 127, 130, 132, and 133.

a. Calculate the marginal product of labor.

b. Explain whether this production function exhibits diminishing marginal
productivity of labor.
Answer:

15) A firm uses two factors of production. Irrespective of how much of each factor is
used, both factors always have positive marginal products which imply that
A) isoquants are relevant only in the long run
B) isoquants have negative slope
C) isoquants are convex
D) isoquants can become vertical or horizontal
E) none of the above

16) The rate at which one input can be reduced per additional unit of the other input,
while holding output constant, is measured by the
A) marginal rate of substitution.
B) marginal rate of technical substitution.
C) slope of the isocost curve.
D) average product of the input.

17) An examination of the production isoquants in the diagram below reveals that:

A) capital and labor will be used in fixed proportions.

B) capital and labor are perfectly substitutable.
C) the MRTS is constant.
D) Both B and C are correct.
E) none of the above

18) The diagram below shows an isoquant for the production of wheat.
Which point has the highest marginal productivity of labor?
A) Point A
B) Point B
C) Point C
D) Point D

19) A straight-line isoquant

A) is impossible.
B) would indicate that the firm could switch from one output to another costlessly.
C) would indicate that the firm could not switch from one output to another.
D) would indicate that capital and labor cannot be substituted for each other in
production.
E) would indicate that capital and labor are perfect substitutes in production.

20) In a production process, all inputs are increased by 10%; but output increases less
than 10%. This means that the firm experiences
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) negative returns to scale.
 Figure 6.2

21) Refer to Figure 6.2. The situation pictured is one of

A) constant returns to scale, because the line through the origin is linear.
B) decreasing returns to scale, because the isoquants are convex.
C) decreasing returns to scale, because doubling inputs results in less than double the
amount of output.
D) increasing returns to scale, because the isoquants are convex.
E) increasing returns to scale, because doubling inputs results in more than double the
amount of output.