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| 1 | |
The short-run production function |
| | A) | is the collection of employee-hours 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 employed, 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 diminishes as the 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 but eventually decreases. |
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| 4 | |
The average product of labor |
| | A) | increases when the marginal product of labor is increasing. |
| | B) | increases when the marginal product of labor is above the average product. |
| | C) | equals 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 value of marginal product of labor curve intersects the labor supply curve. |
| | C) | labor occurs where the value of the marginal product of labor equals the marginal benefit of labor. |
| | D) | both (A) and (B). |
| | E) | both (B) and (C). |
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| 6 | |
Assume that for the last worker hired, MPE=6, p=$2, and w=$10. If one more worker is hired, then 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 portion of the long-run product 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 labor (E) and capital (K) 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) | taken 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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