decreasing returns to scale
The production function for a competitive firm is Q = K^(.5)L^(.5). The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The maximum profits are
5.
An American economist visiting India observed that the roads were maintained by large numbers of workers with picks and shovels and other hand tools, while the same work is done in the United States by relatively small numbers of workers and mechanized devices. He correctly concluded that the reason for this difference is that:
workers in the Unites States are paid more than Indian workers
Which of the following conditions is NOT true when a producer minimizes the cost of producing a given level of output?
The marginal products of all inputs are equal.
Which of the following identifies the optimal usage of inputs by a profit-maximizing firm?
Marginal product of labor/price of labor = marginal product of capital/price of capital
Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 5 units of capital and 10 units of labor are employed
11.
Which of the following production functions displays decreasing returns to scale?
Q = cL^(.2)K^(.5)
The marginal product of labor is defined by the:
change in output divided by the change in labor input usage
The short-run is best defined as the time period in which:
one or more inputs to production are fixed
Whenever average product is declining with increases in input usage:
marginal product is less than average product
The marginal revenue product of labor is equal to the product of:
the marginal revenue per unit of output and the marginal product of labor.
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use
more labor and less capital.
In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:
Its price falls.
In the table below, the average product of labor at L = 3 is:
APL=Q/L
In the table below, the marginal product of labor at L = 4 is:
MPL=change in Q / change in L
The law of diminishing marginal returns states that:
the marginal product of a factor eventually diminishes as more of the input is used, holding other inputs fixed
The following table shows the total output per hour produced in a factory at various levels of employment of labor. The firm sells each unit of output at $2 and each worker is paid a wage of $12.
Table 5-1
Refer to Table 5-1. Diminishing returns occurs beyond:
3 Workers
Which of the following correctly describes a production isoquant?
An isoquant is a curve that shows all possible combinations of inputs that can produce a given level of output.
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The following graph plots the demand curve (blue line) for several consumers in the market for VR headsets in Meade, a small town located in Kansas. The Meade market price of a VR headset is given by the horizontal black line at $240.
Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Jacques, green (triangle symbols) for Kyoko, purple (diamond symbols) for Musashi, tan (dash symbols) for Rina, and blue (circle symbols) for Sean. Use the rectangles to shade the areas representing consumer surplus for each person who is willing and able to purchase a VR headset at a market price of $240. (Note: If a person will not purchase a VR headset at the market price, indicate this by leaving his or her rectangle in its original position on the palette.)
Jacques
Kyoko
Musashi
Rina
Sean
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4
5
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480
420
360
300
240
180
120
60
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PRICE (Dollars per VR headset)
QUANTITY (VR headsets)
Jacques
Kyoko
Musashi
Rina
Sean
Market Price
8, 270
Based on the information on the previous graph, you can tell thatthree consumers will buy VR headsets at the given market price, and total consumer surplus in this market will be
$840
.
Suppose the market price of a VR headset decreases to $120.
On the following graph, use the rectangles once again to shade the areas representing consumer surplus for each person who is willing and able to purchase a VR headset at the new market price: orange (square symbols) for Jacques, green (triangle symbols) for Kyoko, purple (diamond symbols) for Musashi, tan (dash symbols) for Rina, and blue (circle symbols) for Sean. (Note: If a person will not purchase a VR headset at the new market price, indicate this by leaving his or her rectangle in its original position on the palette.)
Jacques
Kyoko
Musashi
Rina
Sean
0
1
2
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7
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480
420
360
300
240
180
120
60
0
PRICE (Dollars per VR headset)
QUANTITY (VR headsets)
Jacques
Kyoko
Musashi
Rina
Sean
Market Price
Based on the information in the second graph, when the market price of a VR headset decreases to $120, the number of consumers willing to buy a VR headset to , and total consumer surplus to
$
.
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