CHAPTER 29
Production Theory
Supply
MULTIPLE CHOICE
288. Traditional economics recognizes four broad categories or factors of production. These
include:
a. land, natural resources, labor, entrepreneurship.
b. land, technology, labor, capital.
c. land, labor, capital, entrepreneurship.
d. land, capital, entrepreneurship, and natural resources.
289.
a. the short run is one year or less.
b. the short run is the period of time when at least one input is fixed.
c. the short run is the period of time when all inputs are variable.
d. the short run is the current accounting period.
290. A production function is
a. a statement of the relationship between the inputs and the outputs.
b. the application of knowledge to create new goods and services.
c. the period of time in which at least one factor of production is fixed.
d. refers to long run changes in output that occur when the firm proportionally increases all
factors of production.
291. The law of diminishing returns refers to
a. the fact that people get less and less enjoyment from each additional unit of a good
consumers.
b. the fact that the longer you work at something, the less effective you are.
c. the fact that, in the short run, output will tend to increase at a decreasing rate as additional
inputs are added.
d. the fact that output will tend to decline as additional inputs are added and at least one
input is fixed.
292. Neoclassical economists argue that most production processes go through three stages of
production. These are:
a. the first, second, and third stage.
b. the beginning, the middle, and the last stage.
c. the stage of increasing marginal returns, diminishing marginal returns, and negative
marginal returns,
d. the stage of increasing marginal returns, zero marginal returns, and decreasing marginal
returns.
293.
a. diminishing marginal returns refers to production in the short run whereas decreasing
returns to scale refers to production in the long run.
b. diminishing marginal returns refers to production in the long run whereas decreasing
returns to scale refers to production in the short run.
c. diminishing marginal returns means that output decreases whereas decreasing returns to
scale means that sales revenue decreases.
d. there is no difference.
294. A firm that is experiencing increasing returns to scale will
a. want to reduce the level of output in order to reduce unit costs.
b. want to increase the level of output in order to reduce unit costs.
c. want to maintain the level of output in order to increase profits.
d. want to consider changing to a new line of work.
295. The progressive critique of neoclassical production theory argues that labor
a. is not an input to production.
b. will work more or less intensely depending on a variety of factors.
c. will not produce diminishing marginal returns.
d. is generally more effective than a machine.
296. Progressives argue that the assumption of diminishing marginal returns
a. is a reliable guide to understanding modern industry.
b. tends to be overwhelmed by changes in technology.
c. only applies to labor intensive industries.
d. is true of manufacturing but not agricultural industries.
297. Henry history because
a. it was a really beautiful car.
b. it was mass produced on an assembly line using standardized parts.
c. it was an expensive but extremely reliable automobile.
d. it was a custom made, carefully crafted automobile purchased primarily by the wealthy.
APPENDIX 29.1
The Relationship Between Total, Average, and Marginal Product
MULTIPLE CHOICE
Table 29.1a
Capital
Labor
Output
10
1
40
10
2
90
10
3
150
10
4
200
10
5
240
10
6
270
10
7
290
10
8
300
10
9
300
298. The data in Table 29.1a describes
a. production in the long run
b. production in the short run.
c. constant returns to scale.
d. diminishing marginal utility.
299. In Table 29.1a, when output is 270, the average product of labor is
a. 27
b. 30
c. 45
d. 50
300. In Table 29.1a, at what point does diminishing marginal returns set in?
a. when the second worker is added.
b. when the third worker is added.
c. when the fourth worker is added.
d. when the fifth worker is added.
301. In Table 29.1a, at what point does output enter the stage of negative marginal returns?
a. when the fifth worker is added.
b. when the 9th worker is added.
c. the point of negative marginal returns is not indicated in the table.
d. when the third worker is added.
302. In Table 29.1a, the marginal product of the 9th worker is
a. 10
b. 9
c. 0
d. cannot be determined from the data.
303. Sam currently has a cumulative 3.5 grade point average. This semester he expects to earn a
2.5 grade point average. Which of the following is true.
a. e point average will go up.
b. e grade point average will stay the same.
c.
d. It depends on how many courses he is taking this semester.