4ECON005C Exploring Economics - Microeconomics
Tutorial week 5. The Producer Theory: Production
MULTIPLE CHOICE QUESTIONS
Question 1. A production function defines the output that can be produced:
A) at the any cost, given the inputs available.
B) for the average firm.
C) if the firm is technically efficient.
D) in a given time period if no additional inputs are hired.
E) as technology changes over time.
Question 2. The slope of the total product curve is the:
A) average product.
B) slope of a line from the origin to the point.
C) marginal product.
D) marginal rate of technical substitution.
Question 3. The law of diminishing returns refers to diminishing:
A) total returns.
B) marginal returns.
C) average returns.
D) all of these.
Question 4. When labor usage is at 12 units, output is 36 units. From this we may infer
that:
A) the marginal product of labor is 3.
B) the total product of labor is 1/3.
C) the average product of labor is 3.
D) none of the above
Question 5. The marginal product of an input is:
A) total product divided by the amount of the input used to produce this amount of output.
B) the addition to total output that adds nothing to total revenue.
C) the addition to total output that adds nothing to profit.
D) the addition to total output due to the addition of one unit of all other inputs.
E) the addition to total output due to the addition of the last unit of an input, holding all other
inputs constant.
Question 6. A function that indicates the maximum output per unit of time that a firm
can produce, for every combination of inputs with a given technology, is called:
A) an isoquant.
B) a production possibility curve.
C) a production function.
D) an isocost function.
4ECON005C Exploring Economics - Microeconomics
Question 7. The short run is:
A) less than a year.
B) three years.
C) however long it takes to produce the planned output.
D) a time period in which at least one input is fixed.
E) a time period in which at least one set of outputs has been decided upon.
Question 8. Which would not increase the productivity of labor?
A) An increase in the size of the labor force
B) An increase in the quality of capital
C) An increase in the quantity of capital
D) An increase in technology
E) An increase in the efficiency of energy
Question 9. You operate a car detailing business with a fixed amount of machinery (capital),
but you have recently altered the number of workers that you employ per hour. Three
employees can generate an average product of 4 cars per person in each hour, and five
employees can generate an average product of 3 cars per person in each hour. What is
the marginal product of labor as you increase the labor from three to five employees?
A) MP = 3 cars
B) MP = 1.5 cars
C) MP = 15 cars
D) MP = -1 cars
Question 10.
The function which shows combinations of inputs that yield the same output is called a(n):
A) isoquant curve.
B) isocost curve.
C) production function.
D) production possibilities frontier.
QUESTIONS FOR DISCUSSION
Question 11.
A. What is a production function? How does a long-run production function differ from a
short-run production function?
B. Why is the marginal product of labor likely to increase initially in the short run as more of
the variable input is hired?
C. What is the difference between a production function and an isoquant?
D. Faced with constantly changing conditions, why would a firm ever keep any factors
fixed? What criteria determine whether a factor is fixed or variable?
E. Can an isoquant ever slope upward? Explain.
4ECON005C Exploring Economics - Microeconomics
EXERCISES
Question 12. Suppose a chair manufacturer is producing in the short run (with its existing
plant and equipment). The manufacturer has observed the following levels of production
corresponding to different numbers of workers:
Number of Workers Number of Chairs
1 10
2 18
3 24
4 28
5 30
6 28
7 25
A. Calculate the marginal and average product of labor for this production function.
B. Does this production function exhibit diminishing returns to labor? Explain.
Question 13. The marginal product of labor in the production of computer chips is 50 chips
per hour. The marginal rate of technical substitution (MRTS) of hours of labor for hours
of machine capital is 1/4. What is the marginal product of capital?
Question 14. Fill in the gaps in the table below.
Quantity of Total Marginal Product Average Product
Variable Output of Variable Input of Variable Input
Input
0 0 — —
1 225
2 300
3 300
4 1140
5 225
6 225
4ECON005C Exploring Economics - Microeconomics
Question 15. A farm produces wheat according to the production function q = 100(K0.8L0.2).
Beginning with a capital input from 4 to 7 and a labor input from 49 to 52, show that
the marginal product of labor and the marginal product of capital are both
decreasing.
HOMEWORK
Question 16. Do the following functions exhibit increasing, constant, or decreasing
returns to scale?
a. q = 3L + 2K
1
b. q = (2 L + 2 K ) 2
c. q = 3LK 2