1. The marginal rate of technical substitution may be defined as all of the following except:
a. the rate at which one input may be substituted for another input in the production process, while total output remains constant
b. equal to the negative slope of the isoquant at any point on the isoquant
c. the rate at which all combinations of inputs have equal total costs
d. equal to the ratio of the marginal products of X and Y
e. b and c
2. The law of diminishing marginal returns:
a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. none of the above
3. The combinations of inputs costing a constant C dollars is called:
a. isocost line
b. isoquant curve
c. MRTS
d. isorevenue line
e. none of the above
4. The marginal product is defined as:
a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. a and b
e. none of the above
5. In a relationship among total, average and marginal products, where TP is maximized:
a. AP is maximized
b. AP is equal to zero
c. MP is maximized
d. MP is equal to zero
e. none of the above
6. The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is:
a. the slope of the isoquant curve
b. the marginal rate of technical substitution (MRTS)
c. equal to MPx/MPy
d. all of the above
e. none of the above
7. Which of the following is never negative?
a. marginal product
b. average product
c. production elasticity
d. marginal rate of technical substitution
e. slope of the isocost lines
8. Concerning the maximization of output subject to a cost constraint, which of the following statements (if any) are true?
a. At the optimal input combination, the slope of the isoquant must equal the slope of the isocost line.
b. The optimal solution occurs at the boundary of the feasible region of input combinations.
c. The optimal solution occurs at the point where the isoquant is tangent to the isocost lines.
d. all of the above
e. none of the above
9. In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:
a. stage II
b. stages I and II
c. when Ep = 1
d. stage III
e. none of the above
10. Marginal revenue product is:
a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c
11. The isoquants for inputs that are perfect substitutes for one another consist of a series of:
a. right angles
b. parallel lines
c. concentric circles
d. right triangles
e. none of the above
12. In production and cost analysis, the short run is the period of time in which one (or more) of the resources employed in the production process is fixed or incapable of being varied.
a. true
b. false
13. Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____________.
a. marginal revenue
b. total output
c. total revenue
d. marginal product
e. none of the above
14. Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ________________.
a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above
15. The isoquants for inputs that are perfect complements for one another consist of a series of:
a. right angles
b. parallel lines
c. concentric circles
d. right triangles
e. none of the above
16. Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:
a. increasing returns to scale
b. constant returns to scale
c. decreasing returns to scale
d. negative returns to scale
e. none of the above
17. The primary purpose of the Cobb-Douglas power function is to:
a. allow one to make estimates of cost-output relationships
b. allow one to make predictions about a resulting increase in output for a given increase in the inputs
c. aid one in gaining accurate empirical values for economic variables
d. calculate a short-run linear total cost function
e. a and b
18. The original Cobb-Douglas function was given as Q = aLbLl-b. It was subsequently rewritten as Q = aLb1Kb2. What benefit was derived in the revision?
a. the function becomes a non-linear relationship so it would fit to production curves having an "S" shape
b. returns to scale can be shown in the revision
c. returns to scale become constant
d. a and b only
e. a, b, and c
19. The Cobb-Douglas production function has which of the following properties?
a. output is a linear increasing function of each of the inputs
b. it provides a good fit to the traditional S-shaped production function
c. the elasticity of production is constant and equal to 1 minus the exponent of the appropriate variable
d. all of the above
e. none of the above
20. In the Cobb-Douglas production function (Q = aLb1Kb2):
a. the marginal product of labor (L) is equal to b1
b. the average product of labor (L) is equal to b2
c. if the amount of labor input (L) is increased by 1 percent, the output will increase by b1 percent
d. a and b
e. a and c