Chapter 7: Production

If production is given by Q = KL, doubling both inputs
1. more than doubles output.
2. exactly doubles output.
3. increases output but does not double it.
4. leaves output unchanged.
Suppose electricity (E) can be produced with coal (C) or gas (G) to operate steam turbines (T). Suppose gas is more efficiently burned than coal but that they are otherwise perfect substitutes. The isoquants are
1. upward sloping.
2. L-shaped.
3. downward sloping curves.
4. downward sloping lines.
Suppose electricity (E) can be produced with coal (C) or gas (G) to operate steam turbines (T). Suppose gas is more efficiently burned than coal but that they are otherwise perfect substitutes. E = ((G + 1/2C), T) The isoquants between gas and coal will be
1. hyperbolas
2. quarter circles
3. lines
When isoquants get progressively further apart there is
1. increasing returns to scale
2. decreasing returns to scale
3. constant returns to scale
When isoquants get progressively closer together there is
1. increasing returns to scale
2. decreasing returns to scale
3. constant returns to scale
When isoquants are evenly spaced there is
1. increasing returns to scale
2. decreasing returns to scale
3. constant returns to scale
On an isoquant-isocost two-input model you can tell that a non-optimal short-run production decision is being made because
1. all decisions in the short run are non-optimal
2. the rate of technical substitution is equal to the ratio of the input prices
3. the rate of technical substitution is not equal to the ratio of the input prices
A firm is defined as
1. a president, some vice presidents, and some employees.
2. any organization that wants to make a profit.
3. any accumulation of productive assets.
4. any organization that turns inputs into outputs.
A production function measures how
1. a firm transforms output into input.
2. a firm transforms inputs into output.
3. an individual maximizes utility.
4. a firm minimizes cost.
The marginal physical productivity of labor is defined as
1. a firm’s total output divided by total labor input.
2. the extra output produced by employing one more unit of labor while allowing other inputs to vary.
3. the extra output produced by employing one more unit of labor while holding other inputs constant.
4. the extra output produced by employing one more unit of capital while holding labor input constant.

Chapter 7: Production

Multiple Choice Questions