CHAPTER 5
PRODUCTION
The following table shows the five topic sections of this chapter and the associated study
guide problems that pertain to each topic section.
Section Topic
1 Basic Production Concepts
Problems M1-M3.
2 Production with One Variable Input
Problems M4-M6, S1-S4, L1-L2.
3 Production in the Long Run
Problems M8-M13, S5-S6, L3-L5.
4 Measuring Production Functions
Problems M14-M15, S7-S9, L6.
5 Other Production Decisions
Problems M16-M18, S10, L7-L9.
Multiple Choice
M1 Production can be thought of as
a. Transforming inputs into outputs of goods and services.
b. Transforming ideas into actions.
c. Factories at work.
d. Combining inputs such as labor and capital.
e. Creating manufactured goods.
M2 Which of the following is the best definition of a production function?
a. A function that lists all possible production methods.
b. A function showing the maximum output the firm can produce for any
combination of inputs.
c. A measure of the firm’s production costs for a given set of inputs.
d. A measure of the minimum technology needed to produce a given level of output.
e. A function that shows maximum outputs obtained from a production facility.
M3 Are production technologies fixed in the short run?
a. Yes, they do not change.
b. Yes mainly, but technologies can change slowly over the course of years.
c. No, but changes tend to be small and predictable.
d. No, but when analyzing a given production function, we assume that technology is
fixed and is the best available at the time.
e. Though technologies change, it is impossible to predict these changes.
Managerial Economics Study Guide
M4 In the short run, is it possible for a firm to change inputs?
a. Yes, any and all inputs can be changed.
b. Yes, although only small input changes are possible.
c. No, all inputs are fixed in the short run.
d. Not completely; one or more inputs are fixed.
e. It depends on the duration of the short run.
M5 As labor usage increases, the marginal product of labor
a. First falls, then rises.
b. First falls, reaches a flat portion, then rises rapidly.
c. First rises, then falls.
d. First rises, then reaches a plateau.
e. First rises, then falls, then rises again.
M6 In the short run, a firm should expand the use of a variable input until
a. Its marginal product is zero.
b. Its marginal revenue product is zero.
c. Its marginal revenue product is at a maximum.
d. Its marginal revenue product equals the input’s marginal cost.
e. None of the above answers is correct.
