Q: Suppose a firm’s short-run production function is $$q = 3L + 20$$, where $$L is $$labor. What is the average product of labor when $$L = 4$$?

$$AP_L = \frac{3 \times 4 + 20}{4} = 8.5$$

Question 1

Which of the following best describes a firm in microeconomics?

Accepted Answer

An organization that converts inputs such as labor, materials, energy, and capital into outputs, the goods and services that it sells.

Question 2

Suppose a bakery uses the production function $$q = 2L + K$$, where $$L is $$labor and $$K is $$capital. If capital is fixed at $$K = 50 in $$the short run, what is the marginal product of labor?

Accepted Answer

The marginal product of labor is $$MP_L = 2.$$

Question 3

Which of the following is NOT a characteristic of a sole proprietorship?

Accepted Answer

It is jointly owned by two or more people under a partnership agreement.

Question 4

A firm’s owners are assumed to maximize profit. Which equation correctly represents profit ($$\pi$$)?

Accepted Answer

$$\pi = R - C$$

Question 5

Which of the following best describes technological efficiency in production?

Accepted Answer

Producing the current level of output with fewer inputs, given existing knowledge about technology and organization.

Question 6

In the short run, which of the following statements is true?

Accepted Answer

At least one factor of production cannot be varied.

Question 7

Given the Cobb-Douglas production function $$Y = AK$$^{\alpha}$$L^{1-\alpha}$$, what does $$A$ represent?

Accepted Answer

A technology parameter that affects overall productivity.

Question 8

If a firm increases only labor while keeping capital constant, which law explains why the marginal product of labor eventually decreases?

Accepted Answer

Law of Diminishing Marginal Returns

Question 9

A nonprofit organization is best described as:

Accepted Answer

An organization neither government-owned nor intended to earn a profit.

Question 10

Which formula correctly calculates the average product of labor ($$AP_L$$)?

Accepted Answer

$$AP_L = \frac{q}{L}$$

Question 11

In the long run, which of the following is true about inputs?

Accepted Answer

All inputs can be varied.

Question 12

A partnership is best described as:

Accepted Answer

A business jointly owned and controlled by two or more people under a partnership agreement.

Question 13

Suppose a firm’s short-run production function is $$q = 3L + 20$$, where $$L is $$labor. What is the average product of labor when $$L = 4$$?

Accepted Answer

$$AP_L = \frac{3 	imes 4 + 20}{4} = 8.5$$

Question 14

Which of the following is a fixed input in the short run for a restaurant?

Accepted Answer

The size of the kitchen.

Question 15

If a firm’s marginal product of labor ($$MP_L) is $$negative, what does this imply?

Accepted Answer

Adding more labor decreases total output.

Question 16

Which of the following is an example of a public sector firm?

Accepted Answer

Hydro Québec

Question 17

A firm’s production function is $$q = f(L, K). In $$the short run, if $$K is $$fixed, how does the firm increase output?

Accepted Answer

By increasing the amount of labor.

Question 18

Which of the following best illustrates the law of diminishing marginal returns in a real-world scenario?

Accepted Answer

A factory hires more workers, but after a certain point, each additional worker adds less to total output than the previous one.

Question 19

Which of the following is NOT a factor of production?

Accepted Answer

Revenue

Question 20

If a firm can substitute labor for capital in the long run to produce the same level of output, this is an example of:

Accepted Answer

Input substitutability

Producers in the Short Run: Ownership, Production Functions, and Marginal Returns

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