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1 | |
The short-run production function: |
| | A) | is the collection of employee-hours hired and capital that yield the same level of output. |
| | B) | shows the relationship between the level of output produced and the number of employee-hours hired all else equal. |
| | C) | shows the relationship between the level of output produced and the amount of capital all else equal. |
| | D) | specifies how much output is produced by any combination of labor and capital. |
| | E) | all of the above. |
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2 | |
The marginal product of labor: |
| | A) | initially increases with the quantity of labor because of specialization. |
| | B) | diminishes after the inflection point on the total product curve. |
| | C) | is zero at the maximum of the total product. |
| | D) | eventually must diminish because capital is fixed. |
| | E) | all of the above. |
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3 | |
In the area of diminishing returns in production: |
| | A) | total output declines with each additional unit of labor input. |
| | B) | the marginal product of labor increases at a decreasing rate. |
| | C) | the marginal product of labor decreases. |
| | D) | the marginal product of labor first increases, then reaches a maximum level, and then decreases. |
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4 | |
The average product of labor. |
| | A) | increases when the MPE is increasing. |
| | B) | increases when the MPE is above the average product. |
| | C) | gives the output per worker. |
| | D) | both (A) and (C). |
| | E) | both (B) and (C). |
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5 | |
We can say that, in a competitive industry, the profit-maximizing amount of: |
| | A) | output occurs where the marginal cost equals the marginal revenue. |
| | B) | labor occurs where the p*MPE equals the perfectly elastic supply of labor. |
| | C) | labor occurs where the value of marginal product (VMPE) equals the marginal benefit of labor. |
| | D) | D. both (A) and (B). |
| | E) | both (B) and (C). |
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6 | |
Assume that for the last worker hired, MPE=5, p=$2, and w=$10, and if one more worker is hired MPE=4, p=$2, and w=$10. Given this information a competitive firm: |
| | A) | should decrease employment. |
| | B) | should increase employment. |
| | C) | should leave employment unchanged. |
| | D) | without information on the value of the marginal product, it is impossible to say what the firm should do. |
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7 | |
In the short run, the demand for labor for a competitive firm is: |
| | A) | the marginal product of labor curve. |
| | B) | the value of the marginal product of labor curve. |
| | C) | the downward-sloping portion of the value of marginal product curve. |
| | D) | perfectly elastic at the market wage. |
| | E) | all of the above. |
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8 | |
The cost of producing a given level of output is minimized: |
| | A) | on the inelastic part of the long-run demand curve. |
| | B) | where the ratio of input prices equals the marginal rate of technical substitution. |
| | C) | where the wage rate equals the slope of the isoquant. |
| | D) | where the ratio of input prices equals the slope of the isocost. |
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9 | |
In the long run, a firm hires inputs such that: |
| | A) | MUE/MUK = w/r. |
| | B) | w = VMPE and r = VMPK. |
| | C) | VMPE/VMPK = w/r. |
| | D) | all of the above. |
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10 | |
The scale effect implies that: |
| | A) | firms substitute towards the input that has become relative cheaper. |
| | B) | along with the substitution effect the demand for labor is downward-sloping. |
| | C) | the demand for labor may be upward-sloping when labor is inferior. |
| | D) | output always increases when the wage falls. |
| | E) | none of the above. |
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