Suppose firms A and B each make T-shirts. Firm A’s production function is q = L0.5K0.5. Firm B’s production function is q = 1.2 L0.5K0.5. If the two firms each hire the same amounts of capital and labor, compare the two firms in terms of APL and MPL. What will be an ideal response? […]
Date: September 9th, 2020
The implementation of the assembly line is an example of how A) changes in the organization of production improve productivity. B) neutral technical change improves productivity. C) non-neutral technical change can decrease productivity. D) labor saving technical change increases economy-wide unemployment. ANSWER A
Date: September 9th, 2020
Technical and organizational change A) typically reduces prices by increasing the supply of the product, ceteris paribus. B) typically reduces prices by decreasing the demand for the product, ceteris paribus. C) typically increases prices by increasing the demand for the product, ceteris paribus. D) typically increases prices by decreasing the supply for the product, ceteris […]
Date: September 9th, 2020
How much do outputs increase when labor and capital increase from 1 to 2 units for the following production function , q = 10L0.5K0.3? A) 7.4 units B) 7 units C) 8 units D) None of the above. ANSWER A
Date: September 9th, 2020
Let the production function be q = ALaKb. The function exhibits constant returns to scale if A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given. ANSWER A
Date: September 9th, 2020
What is one reason “micro-managers” might be less successful than so-called “delegators”? A) Delegators are smarter. B) Delegators enjoy increasing returns to scale. C) Micro-managers suffer decreasing returns to scale. D) Micro-managers have constant returns to scale. ANSWER C
Date: September 9th, 2020
Suppose the production of mp3 players can be represented by the following production function: q = L0.4K0.4. The firm currently produces q1 units. If all inputs doubled, the new level of output will equal A) 20.4 q1. B) 20.8 q1. C) 0.8 q1. D) 1.6 q1. ANSWER B
Date: September 9th, 2020
A firm is currently producing 100 widgets using 4 units of labor and 12 units of capital. The firm’s production function exhibits constant returns to scale. How many units of labor and capital are needed to produce 350 widgets? A) L = 14; K = 42 B) L = 15; K = 45 C) L […]
Date: September 9th, 2020
In the Primary Metals industry, it is estimated that the elasticity of output with respect to labor is 0.51 and the elasticity of output with respect to capital is 0.73. These two measures indicate that the primary metals industry is characterized by A) decreasing returns to scale. B) constant returns to scale. C) increasing returns […]
Date: September 9th, 2020
Does this production function, q = 10L0.5K0.3, experience increasing, decreasing or constant returns to scale? A) Decreasing because a 100% increase in inputs increases outputs by 80%. B) Increasing because an 80% increase in inputs increases outputs by 100%. C) Decreasing because 0.5 + 0.3 < 1. D) A and C. ANSWER D
Date: September 9th, 2020
