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
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
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
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
If inputs into production cannot be substituted for each other but have to be employed in fixed proportions isoquants are straight, downward-sloping lines. Indicate whether the statement is true or false ANSWER False. Isoquants are straight lines when inputs are perfect substitutes. When input relations are fixed they are right angles.
Date: September 9th, 2020
Let the production function be q = ALaKb. The function exhibits increasing 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 B
Date: September 9th, 2020
Let the production function be q = ALaKb. The function exhibits decreasing 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 C
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
