Unit 5: Production Theory - Practice Quiz

1 A production function shows the relationship between:

2 In the short run, at least one factor of production is:

3 Average Product (AP) of labour is calculated as:

4 Marginal Product (MP) refers to the:

5 The Law of Variable Proportions operates in the:

6 When Marginal Product is zero, Total Product is:

7 As long as Marginal Product is greater than Average Product, Average Product will:

8 A curve showing all combinations of two inputs that yield the same level of output is called an:

9 An isoquant normally slopes:

10 The Marginal Rate of Technical Substitution (MRTS) measures the rate at which one input is:

11 An isocost line shows all combinations of two inputs that a firm can buy with a given:

12 The optimal (least-cost) combination of inputs occurs where the isoquant is:

13 At the point of least-cost combination, MRTS between labour and capital equals the:

14 The slope of the isocost line is determined by the:

15 Returns to scale are studied in the:

16 When all inputs are doubled and output more than doubles, the firm experiences:

17 If all inputs are doubled and output also exactly doubles, the firm has:

18 When all inputs are increased by 50% but output rises by only 30%, the firm faces:

19 Which of the following is a common cause of increasing returns to scale?

20 Decreasing returns to scale are mainly caused by:

21 A firm's short-run production function is , where is labour. At what level of is the marginal product of labour maximised?

22 The law of variable proportions states that as more units of a variable input are added to fixed inputs, the marginal product will eventually:

23 If total product is at its maximum, the marginal product of the variable input is:

24 Average product is maximised at the point where:

25 With 5 workers total output is 100 units; with 6 workers it is 108 units. The marginal product of the 6th worker is:

26 The most efficient stage of production for a rational producer in the short run is Stage II because in this stage:

27 An isoquant that is a straight downward-sloping line indicates that the two inputs are:

28 The marginal rate of technical substitution (MRTS) of labour for capital is equal to:

29 L-shaped isoquants indicate that the two inputs are:

30 As we move down along a convex isoquant, the MRTS of labour for capital typically:

31 A producer minimises cost for a given output where the isoquant is tangent to the isocost line, i.e. where:

32 At the optimum input mix, the condition can also be written as equal marginal product per rupee:

33 At a firm's current input mix, , , , . To reduce cost the firm should:

34 An isocost line shifts outward parallel to itself when:

35 The locus of least-cost input combinations at various output levels, holding input prices constant, is called the:

36 If all inputs are doubled and output increases by more than double, the firm experiences:

37 For the Cobb-Douglas function , the returns to scale are:

38 A production function shows which type of returns to scale?

39 A production function is homogeneous of degree if . Increasing returns to scale correspond to:

40 Which of the following is a primary cause of decreasing returns to scale?

41 A short-run production function is given by . At what level of labor does the marginal product of labor reach its maximum?

42 For the production function , average product of labor is maximized at the level of where:

43 Which statement about the relationship between total, average, and marginal product is correct?

44 A firm's production function is . The stage of production that a rational firm avoids for a variable input begins where:

45 The elasticity of production (output elasticity) with respect to labor equals unity precisely when:

46 Given for a fixed capital stock, what is the marginal product of labor at ?

47 An isoquant is convex to the origin because:

48 The marginal rate of technical substitution of labor for capital () is expressed as:

49 For a Cobb-Douglas function , the equals:

50 A firm minimizes cost for a given output when:

51 At its current input mix a firm finds and . To reduce cost for the same output, it should:

52 The expansion path of a firm traces:

53 Given , , , the least-cost combination to produce requires equal to:

54 If input prices are equal () but the isoquant is a straight line with slope , the firm's optimal choice is to:

55 The production function exhibits:

56 A function displays which returns to scale?

57 For , doubling both inputs changes output by a factor of approximately:

58 Which best distinguishes returns to scale from the law of returns to a factor?

59 A production function shows increasing returns to scale at low output and decreasing returns at high output. This is best explained by:

60 For a homogeneous production function of degree , Euler's theorem states that equals: