31
37) Refer to Figure 7.4. The marginal product of the fourth worker is
A) 8.
B) 12.5.
C) 48.
D) 92.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
38) Refer to Figure 7.4. The marginal product of the sixth worker is
A) –50.
B) –5.
C) 5.
D) 8.33.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
39) Refer to Figure 7.4. The average product with three workers is
A) 10.
B) 14.
C) 30.
D) 126.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
40) Refer to Figure 7.4. The average product with five workers is
A) 1.
B) 2.5.
C) 5.
D) 11.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
32
41) Refer to Figure 7.4. The average product with six workers is
A) –8.33.
B) –5.
C) 5.
D) 8.33.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
42) Refer to Figure 7.4. Diminishing marginal returns begin when the ________ worker is hired.
A) first
B) second
C) third
D) fifth
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
43) Refer to Figure 7.4. The marginal product of the first worker is
A) 12.
B) 16.
C) 20.
D) 32.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
44) Refer to Figure 7.4. The marginal product of the third worker is
A) 10.
B) 28.67.
C) 32.
D) 42.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
33
45) Refer to Figure 7.4. The marginal product of the fifth worker is
A) 0.
B) 5.
C) 11.
D) 55.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
46) Refer to Figure 7.4. The average product of two workers is
A) 10.
B) 16.
C) 22.
D) 44.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
47) Refer to Figure 7.4. The average product of four workers is
A) 2.
B) 12.5.
C) 20.
D) 34.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
48) Refer to Figure 7.4. The average product of six workers is
A) –8.33.
B) –5.
C) 5.
D) 8.33.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
34
49) If diminishing marginal returns have already set in for The Picture Perfect Framing Store and the
marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer
must be
A) negative.
B) zero.
C) less than 20.
D) greater than 20.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
50) If labor is a variable input in production, the law of diminishing marginal returns implies that in the
short run,
A) labor‘s marginal product is constant.
B) labor’s marginal product decreases after a certain point.
C) total product is negative.
D) total product is negative after a certain point has been reached.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
35
Refer to the information provided in Figure 7.5 below to answer the question(s) that follow.
Figure 7.5
51) Refer to Figure 7.5. Diminishing marginal returns set in after the ________ worker is hired.
A) first
B) fifth
C) eighth
D) sixteenth
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
52) Refer to Figure 7.5. Increasing returns continue until the ________ worker is hired.
A) first
B) fifth
C) eighth
D) sixteenth
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
53) If the marginal product of labor is less than the average product of labor, then the
A) marginal product must be increasing.
B) average product must be decreasing.
C) marginal product must be decreasing.
D) Both B and C
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
36
54) The version of the law of diminishing returns that applies to production
A) implies that as we add more workers, our output decreases.
B) applies only in the short run.
C) is true only when all inputs are variable.
D) applies in the short and long run.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
Refer to the information provided in the table below to answer the following question.
Table 7.3
55) Refer to Table 7.3. Suppose output varies, ceteris paribus, with labor input in the following manner
displayed above. After how many units of labor do diminishing returns set in?
A) 3
B) 4
C) 5
D) They do not set in.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
56) When total product is maximized, marginal product
A) and average product are zero.
B) is positive, but average product is zero.
C) is zero, but average product is positive.
D) and average product are positive.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
37
57) At the point where total product is maximized, marginal product
A) is zero, but average product is still positive.
B) and average product are negative.
C) is positive, but average product is negative.
D) and average product are positive.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
58) If marginal product is greater than average product, then
A) average product must be decreasing.
B) marginal product must be decreasing.
C) marginal product must be increasing.
D) marginal product could either be increasing or decreasing.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
59) If we assume that labor is the only variable input, the slope of the total product curve in the short run
A) has no economic significance.
B) measures the average product of labor.
C) measures the marginal product of labor.
D) measures both the marginal and average product at all points on the total product curve.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
60) You own a business that answers telephone calls for physicians after their offices close. You have an
incentive to substitute capital for labor if the
A) price of capital increases.
B) price of labor decreases.
C) price of capital decreases.
D) marginal product of labor increases.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–12
38
61) Firms have an incentive to substitute labor for capital as the
A) price of capital increases.
B) price of capital decreases.
C) price of labor increases.
D) marginal product of labor decreases.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–12
Refer to the information provided in Figure 7.6 below to answer the question(s) that follow.
Figure 7.6
62) Refer to Figure 7.6. The shoe manufacturer currently produces 50 units of output. If this shoe
manufacturer increases labor from 15 to 20, the marginal product of the 20th worker
A) is zero, as the total number of shoes produced remains at 50.
B) is 8.5, as capital can be reduced by 8.5 units when the 20th worker is hired.
C) cannot be determined because output remains constant.
D) cannot be determined because both capital and labor have been increased.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
39
63) Refer to Figure 7.6. If the price of capital is $10 and the price of labor is $20, the optimal production
technique is
A) A.
B) B.
C) C.
D) D.
Topic: The Production Process
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro–17
64) Refer to Figure 7.6. If this shoe manufacturer increases labor from 20 to 25 (moving along the given
isoquant with Q = 50), the marginal product of the 25th worker
A) is zero, as the total number of shoes produced remains at 50.
B) is 7.5, as capital can be reduced by 7.5 units when the 25th worker is hired.
C) cannot be determined because output remains constant.
D) cannot be determined because both capital and labor have been increased.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
65) Refer to Figure 7.6. If the price of capital is $20 and the price of labor is $10, the optimal product
technique is
A) A.
B) B.
C) C.
D) D.
Topic: The Production Process
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–17
40
66) Assume that the price of labor and capital have remained the same, but that the average educational
level of workers has increased and therefore the productivity of labor has increased. This would lead a
firm to
A) use a more capital–intensive production technology.
B) use a more labor–intensive technology.
C) not change its production technology, but to produce fewer units of output.
D) use only labor to produce the product.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
67) Assume that capital and labor are complementary inputs. If the firm increases the amount of capital it
employs, this would
A) cause the firm to move down along the MP schedule for labor.
B) cause the firm to move up along its MP schedule for labor.
C) shift the firm’s MP schedule for labor to the left.
D) shift the firm’s MP schedule for labor to the right.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17
68) The cost–minimizing equilibrium condition can be written as
A) MPL = MPK.
B) PL = PK.
C) (MPL)(PL) = (MPK)(PK).
D) MPL/PL = MPK/PK.
Topic: The Production Process
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–17