SOLUTION_Problem Set II_Fall 2011

# SOLUTION_Problem Set II_Fall 2011 - PROBLEM SET 2 Due...

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PROBLEM SET 2 Due MONDAY October 24 , before class Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Writing total output as Q, change in output as Q, total labor employment as L, and change in labor employment as L, the marginal product of labor can be written algebraically as A) Q / L. B) Δ Q / Δ L. C) Δ L / Δ Q. D) Δ Q L. 1) 2) When the average product is decreasing, marginal product A) is decreasing. B) equals average product. C) exceeds average product. D) is less than average product. E) is increasing. 2) 3) Use the following two statements to answer this question: I. The marginal product of labor is the slope of the line from the origin to the total product curve at that level of labor usage. II The average product of labor is the slope of the line that is tangent to the total product curve at that level of labor usage. A) Both I and II are true. B) Both I and II are false. C) I is false, and II is true. D) I is true, and II is false. 3) 4) If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called: A) the total product. B) an isoquant. C) the marginal product. D) the average product. E) none of the above 4) 5) Suppose there are ten identical manufacturing Frms that produce computer chips with machinery (capital, K) and labor (L), and each Frm has a production function of the form q = 10KL 0.5 . What is the industry - level production function? A) Q = 100L 0.5 B) Q = 100KL 0.5 C) Q = 10K 10 L 5 D) none of the above 5) 6) If the isoquants are straight lines, then A) the marginal rate of technical substitution of inputs is constant. B) inputs have Fxed costs at all use rates. C) only one combination of inputs is possible. D) there are constant returns to scale. 6) 1

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7) Use the following two statements to answer this question: I. "Decreasing returns to scale" and "diminishing returns to a factor of production" are two phrases that mean the same thing. II Diminishing returns to all factors of production implies decreasing returns to scale. A) I is true, and II is false. B) Both I and II are false. C) I is false, and II is true. D) Both I and II are true. 7) 8) Use the following two statements to answer this question: I. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output. II.
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SOLUTION_Problem Set II_Fall 2011 - PROBLEM SET 2 Due...

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