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
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
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
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
According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
a. decreasing returns, and declining average and marginal costs
b. increasing returns, and declining average and marginal costs
c. increasing returns, and increasing average and marginal costs
d. decreasing returns, and increasing average and marginal costs
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
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
When a manufacturer's home currency appreciates substantially,
domestic sales decline
foreign sales decline
company-owned foreign plant and equipment will increase
margins often decline
all of the above
European Union labor costs exceed U.S. and British labor costs primarily because
worker productivity is lower in the EU
union wages are higher in the EU
layoffs and plant closings are more restrictive in the U.S. and Britain
paid time off is higher in the EU
labor-management relations are better in the EU
Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
sacrifice market share abroad but build market share at home
increase production volume to realize learning curve advantages
sell foreign plants and equipment to lower their debt
reduce the costs of transportation
In the last twenty-five years, the Yen and German mark and now the Euro have
fluctuated widely against the dollar
appreciated against the dollar
exchanged without restrictions
all of the above
In a _____________ demand function involving price as one of the explanatory variables, the point price elasticity is a function of the values of these explanatory variables.
a. linear
b. multiplicative
c. a and b
d. none of the above