Question 1

Which of the following best describes the law of diminishing marginal returns?

Accepted Answer

As more of a variable input is added to fixed inputs, the additional output produced by each additional unit of the variable input eventually decreases.

Question 2

Given the production function $$F(L, K) = L$$^{0.5}$$ K$$^{0.5}$$, with K$ fixed at 1, what is the marginal product of labor (MPL)?

Accepted Answer

$$MPL = 0.5 L$$^{-0.5}$$

Question 3

Suppose a firm’s production function is $$F(L, K) = 2L + 3K. If $$both inputs are doubled, what happens to output?

Accepted Answer

Output exactly doubles, indicating constant returns to scale.

Question 4

Which of the following graphs best represents a total product curve that satisfies the law of diminishing marginal returns?

Accepted Answer

The graph where the slope of the total product curve eventually decreases as labor increases.

Question 5

If the marginal product of labor is greater at $$L_1$$ than at $$L_2$$, but the average product of labor is greater at $$L_2$$ than at $$L_1$$, which is true?

Accepted Answer

The slope of the total product curve is steeper at $$L_1$$, but the slope of the line from the origin to the curve is steeper at $$L_2.$$

Question 6

What does the marginal rate of technical substitution (MRTS) measure?

Accepted Answer

The maximum amount of one input that can be reduced when one extra unit of another input is used, keeping output constant.

Question 7

Which equation correctly expresses the marginal rate of technical substitution (MRTS) between labor and capital?

Accepted Answer

$$MRTS = \frac{MP_L}{MP_K}$$

Question 8

Which of the following isoquant maps represents perfect substitutes in production?

Accepted Answer

Isoquants that are straight lines with a constant slope.

Question 9

Which of the following isoquant maps represents perfect complements in production?

Accepted Answer

Isoquants that are L-shaped.

Question 10

A firm’s production function is $$F(L, K) = LK. If $$both inputs are doubled, what happens to output?

Accepted Answer

Output quadruples, indicating increasing returns to scale.

Question 11

Suppose a firm can use either labor or capital to produce output, and the isoquants are straight lines. What does this imply about the inputs?

Accepted Answer

Labor and capital are perfect substitutes.

Question 12

If a firm’s isoquants are L-shaped, what does this imply about the production technology?

Accepted Answer

Inputs must be used in fixed proportions; they are perfect complements.

Question 13

Which of the following best describes an isoquant?

Accepted Answer

A curve showing all possible combinations of inputs that yield the same output.

Question 14

If a firm’s production function exhibits decreasing returns to scale, what happens to output if all inputs are doubled?

Accepted Answer

Output less than doubles.

Question 15

Suppose the average product of labor is given by $$APL = L$$^{-0.5}$$. What happens to $$APL$$ as L$ increases?

Accepted Answer

$$APL$$ decreases.

Question 16

A firm’s total product curve is initially steep but becomes flatter as more labor is added, holding capital fixed. What does this illustrate?

Accepted Answer

The law of diminishing marginal returns.

Question 17

If the marginal product of labor is $$MPL = 0.5 L$$^{-0.5}$$, what is the total product function F(L$$)$$, assuming F(0) = 0$?

Accepted Answer

$$F(L) = L$$^{0.5}$$

Question 18

Which of the following is true about the short run in production theory?

Accepted Answer

At least one input is fixed.

Question 19

Which of the following is a real-world example of increasing returns to scale?

Accepted Answer

An automobile assembly line where doubling all inputs more than doubles output due to specialization.

Microeconomic Theory: Production Technology and Producer Theory (Chapter 6 Study Notes)

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