Prod%26CostsP%26R - Page 1 Problems chs 6&7 Some symbols...

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Some symbols print out strangely, see esp no 48-49 1. a. When the price of a good goes up, consumers buy more of it. b. When the price of a good goes up, firms produce more of it. c. When the Federal government sells bonds interest rates rise and private investment is reduced. d. All of the above. e. None of the above. 2. A production function defines the output that can be produced a. at the lowest cost, given the inputs available. b. with the fewest amount of inputs. 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. 3. A farmer uses L units of labor and K units of capital to produce Q units of corn using a production function F(K,L). A production plan that uses K=L=10 to produce Q units of corn where Q < F (10, 10) is said to be a. technically feasible and efficient b. technically unfeasible and efficient c. technically feasible and inefficient d. technically unfeasible and efficient e. none of the above 4. Use the following statements to answer this question. I. The numerical labels attached to indifference curves are meaningful only in an ordinal way. II. The numerical labels attached to isoquants are meaningful only in an ordinal way. a. both I and II are true. b. I is true and II is false. c. I is false and II is true. d. both I and II are false. 5. An isoquant a. must be linear. b. cannot have a negative slope. c. is a curve that shows all the combinations of inputs that yield the same total output. d. is a curve that shows the maximum total output as a function of the level of labor input. e. is a curve that shows all possible output levels that can be produced at the same cost.
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Page 2 6. 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. 7. 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. 8. The law of diminishing returns refers to diminishing a. total returns. b. marginal returns. c. average returns. d. all of these. 9. 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. 10. When the average product is decreasing, marginal product a. equals average product. b. is increasing. c. exceeds average product. d. is decreasing.
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This note was uploaded on 08/25/2009 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Prod%26CostsP%26R - Page 1 Problems chs 6&7 Some symbols...

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