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 […]
The cost of waiting two months for health care to address a debilitating problem in Canada is most accurately described as A) an explicit cost. B) an accounting cost. C) no real cost. D) an opportunity cost. ANSWER D
Economic efficiency entails A) producing a given amount of output with the most expensive mix of inputs. B) producing a given amount of output with the least number of inputs. C) producing a given amount of output with the most inputs. D) producing a given amount of output with the cheapest mix of inputs. […]
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
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
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
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 […]
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 […]
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
A firm can experience increasing, constant and decreasing returns to scale for various levels of output. Indicate whether the statement is true or false ANSWER True . As output increases a firm can experience all types of returns to scale.
