Q: Suppose a bakery has a fixed number of ovens (capital) and can hire more bakers (labor). If hiring the third baker increases output from 20 to 28 cakes per hour, what is the Marginal Product of Labor (MPL) for the third baker?

$$\text{MPL} = \frac{28 - 20}{3 - 2} = 8$$

Q: A firm hires 4 workers and produces 40 units. What is the Average Product of Labor (APL)?

$$\text{APL} = \frac{40}{4} = 10$$

Q: Which formula correctly represents the Marginal Product of Labor (MPL)?

$$\text{MPL} = \frac{\Delta Q}{\Delta L}$$

Question 1

Which of the following best describes the difference between the short run and the long run in production?

Accepted Answer

In the short run, at least one input is fixed; in the long run, all inputs are variable.

Question 2

Suppose a bakery has a fixed number of ovens (capital) and can hire more bakers (labor). If hiring the third baker increases output from 20 to 28 cakes per hour, what is the Marginal Product of Labor (MPL) for the third baker?

Accepted Answer

$$	ext{MPL} = \frac{28 - 20}{3 - 2} = 8$$

Question 3

If the Average Product of Labor (APL) is 10 units per worker and the Marginal Product of Labor (MPL) for the next worker is 12 units, what happens to APL?

Accepted Answer

APL will increase.

Question 4

A car wash hires workers at $$15 per hour. Each additional worker produces fewer clean cars per hour than the previous one. If the price per car wash is 10$$, which rule should the firm use to decide how many workers to hire?

Accepted Answer

Hire until the value of MPL equals the wage.

Question 5

Given the production function $$Q = f(L, K)$$, what does $$K$$ represent in microeconomic production theory?

Accepted Answer

The capital input, such as machines and equipment.

Question 6

If a firm is operating in Phase 3 of the Total Product curve, which of the following is true?

Accepted Answer

Output is rising, but at a decreasing rate.

Question 7

Suppose a firm’s production function in the short run is $$Q = f(L, \overline{K}). $$What does $$\overline{K}$$ indicate?

Accepted Answer

$$\overline{K} is $$the fixed capital input.

Question 8

A firm observes that the Marginal Product of Labor (MPL) is less than the Average Product of Labor (APL). According to the marginal–average rule, what happens to APL?

Accepted Answer

APL falls.

Question 9

If the MPL curve intersects the APL curve at a certain level of labor, what does this point represent?

Accepted Answer

The maximum of the APL curve.

Question 10

A firm hires 4 workers and produces 40 units. What is the Average Product of Labor (APL)?

Accepted Answer

$$	ext{APL} = \frac{40}{4} = 10$$

Question 11

In the context of the car wash example, if hiring the fifth worker increases output by 1 car per hour and the wage is $$15/hour, but the price per car wash is 10$$, what is the net gain from hiring the fifth worker?

Accepted Answer

$$1 	imes 10 - 15 = -5$$

Question 12

Which of the following statements about the Total Product curve is correct?

Accepted Answer

It increases at an increasing rate, then at a constant rate, then at a decreasing rate.

Question 13

If a firm expands its scale of operation by buying more machines and hiring more workers, this is considered:

Accepted Answer

A long-run decision.

Question 14

Which formula correctly represents the Marginal Product of Labor (MPL)?

Accepted Answer

$$	ext{MPL} = \frac{\Delta Q}{\Delta L}$$

Question 15

A firm’s MPL is rising, then becomes constant, then falls. What does this pattern indicate?

Accepted Answer

The firm is experiencing increasing returns, then constant returns, then diminishing returns.

Question 16

If a firm hires workers until the value of the marginal product equals the wage, what economic principle is it following?

Accepted Answer

Profit maximization.

Question 17

Which of the following is NOT a reason for output rising faster as more workers are added in Phase 1 of the Total Product curve?

Accepted Answer

Diminishing returns.

Question 18

If the wage is $$20 per hour and the value of the marginal product for the next worker is 18$$, what should the firm do?

Accepted Answer

Do not hire the worker.

Question 19

Which statement about the relationship between MPL and APL is correct?

Accepted Answer

When MPL equals APL, APL is at its maximum.

Question 20

A firm’s production function is $$Q = f(L, K). In $$the short run, if capital is fixed at $$K = 10$$, how would you write the production function?

Accepted Answer

$$Q = f(L, 10)$$

Production Functions, Marginal and Average Product of Labor: Microeconomics Study Guide

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