Explain why labor might not always be a variable input. What will be an ideal response? ANSWER In the real world, units of labor are not identical. Many firms employ highly specialized units of labor. Their supply might be very inelastic so that the firm cannot easily increase the amount of this type of […]
Which of the following statements best summarizes the law of diminishing marginal returns? A) In the short run, as more labor is hired, output diminishes. B) In the short run, as more labor is hired, output increases at a diminishing rate. C) In the short run, the amount of labor a firm will hire diminishes […]
In the long run, all factors of production are A) variable. B) fixed. C) materials. D) rented. ANSWER A
A production function tells the firm A) the maximum it can expect to produce with a given mix of inputs. B) the average it can expect to produce with a given mix of inputs. C) the minimum it can expect to produce with a given mix of inputs. D) the average level of production for […]
If the marginal productivity of labor is constant for all levels of output, then the average productivity of labor A) is constant. B) equals the marginal productivity of labor. C) Both A and B above. D) Either A or B above but not both. ANSWER C
Production functions only apply to advanced economies. Indicate whether the statement is true or false ANSWER False. Production functions describe the relationship between inputs and outputs, and apply to all kinds of economies.
Which of the following is least likely to be considered a capital input? A) a sewing machine B) a tractor C) a telephone D) a ten dollar bill ANSWER D
Limited liability is a benefit to A) sole proprietorships. B) partnerships. C) corporations. D) All of the above. ANSWER C
Leisure is an inferior good for Assel. In response to an increase in the wage rate, she will A) supply fewer hours of labor. B) supply more hours of labor. C) enjoy more hours of leisure. D) None of the above. ANSWER B
The nonprofit or not-for-profit sector consists of organizations that A) intend to earn a profit. B) are always inefficient. C) are primarily concerned with the welfare of their own employees. D) typically pursue social or public interest objectives. ANSWER D