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
Jennifer is the only employee of her sole proprietorship. She is entertaining the idea of hiring an additional employee. She knows that on her own she can produce 100 units per day. Jennifer figures that Applicant A will help her produce 175 units per day whereas Applicant B will help her produce 155 units per […]
Date: September 9th, 2020
Consider the following short-run production function: q = 5L2 – 1/3 L3. At what level of L do diminishing marginal returns begin? At what level of L do diminishing returns begin? What will be an ideal response? ANSWER MP = 10L – L2. Marginal product peaks when L = 5 and equals zero when […]
Date: September 9th, 2020
A firm operating with diminishing total returns cannot be profit maximizing. Indicate whether the statement is true or false ANSWER True . This firm could produce more output with fewer inputs. This cannot be profit maximizing.
Date: September 9th, 2020
Suppose the production of paved roadways can be represented as q = L0.5 + K0.5. Which of the following statements is (are) TRUE? A) Labor is subject to diminishing marginal productivity in the short run. B) Labor and capital are imperfect substitutes. C) The isoquants for paved roadways are convex. D) All of the above. […]
Date: September 9th, 2020
A typical professional National Football League team has three quarterbacks on its roster. What is one reason why they might not have a fourth quarterback? A) The fourth quarterback’s marginal product is approximately zero. B) The fourth quarterback’s marginal product is approximately ten. C) The fourth quarterback’s marginal product is less than the first quarterback’s […]
Date: September 9th, 2020
Describe the relationship between marginal productivity and average productivity. Use calculus or a graph to support your answer. What will be an ideal response? ANSWER AP = Q(L)/L. dAP/dL = ([L ∗ MP] – Q) /L2 = (MP – AP)/L. Thus, if MP = AP, AP is constant. If MP > AP, AP will […]
Date: September 9th, 2020
For a linear production function, q = f(L,K) = 4L + 2K, what is the short-run production function given that capital is fixed at = 50? A) q = 4L + 100 B) q = 4L + 50 C) q = 4L D) q = 104 ANSWER A
Date: September 9th, 2020
