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) […]
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 […]
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 […]
If a farmer produces 1000 bushels of corn using ten acres of land and one tractor and is able to produce 2000 bushels of corn using twenty acres of land and one tractor, the farmer has A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) no returns to […]
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
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
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 […]
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
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
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.
