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
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.
Date: September 9th, 2020
In the food and kindred products industry, it is estimated that the elasticity of output with respect to labor is 0.43 and the elasticity of output with respect to capital is 0.48. These two measures indicate that the primary metals industry is characterized by A) decreasing returns to scale. B) constant returns to scale. C) […]
Date: September 9th, 2020
Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the production function has constant returns to scale. What will be an ideal response? ANSWER When L = L1 and K = K1, q = q1. Let L2 = m ∗ L1 and K2 = m ∗ K1 so […]
Date: September 9th, 2020
Suppose the production function for a certain device is q = L + K. If neutral technical change has occurred, which of the following could be the new production function? A) q = L + 5K B) q = 5 (L + K) C) q = 5L + K D) All of the above […]
Date: September 9th, 2020
With capital on the vertical axis and labor on the horizontal axis, vertical isoquants imply that A) capital and labor are perfect substitutes. B) capital and labor must be used together in a certain proportion. C) capital is not productive. D) labor is not productive. ANSWER C
Date: September 9th, 2020
What is the MRTS for a firm with the following production function, q = 10L0.5K0.3? A) MRTS = 5K/3L B) The firm will substitute a constant 3 units of capital for 5 units of labor. C) The MRTS does not exist because labor and capital are perfect complements. D) None of the above. ANSWER […]
Date: September 9th, 2020
How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L0.5K0.5? A) L = 5 B) L = 2.5 C) L = 200 D) L = 2.25 ANSWER A
Date: September 9th, 2020
How much capital does a firm require to produce q = 3200 when labor is 4 and they have a production function equal to q = 200L0.5K0.5? A) K = 64 B) K = 8 C) K = 16 D) K = 25 ANSWER A
Date: September 9th, 2020
What is the MRTS for a firm with the following production function , q = 200L0.5K0.5 with L = 4 and K = 16? A) MRTS = -4 B) MRTS = -2 C) MRTS = -1 D) MRTS = -8 ANSWER A
Date: September 9th, 2020
