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28 Cards in this Set

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A firm's _______ summarizes all of its possible methods of producing its output.




production technology



A firm's _______ contains all combinations of inputs and outputs that are possible given the firms' technology.




production possibilities set


A firm's _______ contains all combinations of inputs and outputs that the firm can achieve using efficient production methods.


efficient production frontier


A firm's _______ shows the amount of output a firm can produce from given amounts of inputs using efficient production methods.


production function



As long as a firm can freely dispose of any extra inputs it may have:




its production function must slope upward.



In the short run:




at least one input is fixed.



The long run refers to a period of time over which:




all inputs are variable.



Which of the following is a short-run decision?




Because of an increase in enrollment, the economics department hires two new professors.


Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5√L√K. If the firm has 100 units of capital, what is its short-run production function?


Q = F(L) = 50√L


Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5√L√K. The firm has 100 units of capital. If the firm uses an efficient production method, how much output does it produce in the short run if it hires 25 workers?


250 units


Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 8√L√K. The firm has _____ units of capital. If the firm uses an efficient production method and hires _____ workers, it can produce _____ units of output.


225; 100; 1,200


Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 4√L√K. The firm has _____ units of capital. If the firm uses an efficient production method and hires _____ workers, it can produce _____ units of output.


225; 225; 900



The average product of labor is defined as:




the amount of output divided by the number of workers employed.



The marginal product of labor is defined as:




the additional output produced by the last ∆L units of labor hired.


Refer to Table:




What is the marginal product of the 3rd worker?


What is the average product of the 4th worker?


Diminishing returns set in with the ______ worker


What is the marginal product of the 6th worker?


What is the average product of the 5th worker?




4 units of output



4 units of output




fifth



1 unit of output



4.4 units of output



Which of the following is the formula for the marginal product of labor?




[F(L) - F(L - ∆L)]/∆L



Which of the following is the formula for the average product of labor?




F(L)/L


According to the Law of Diminishing Marginal Returns, as additional units of one input are employed as all other inputs are held constant, total output will eventually ______.


increase at a decreasing rate


When the marginal product of an input is ______ than the average product, the marginal units of the input _____ the average product.


larger; raise



If hiring one more worker causes the average product of labor to fall, then:




the marginal product of labor is less than the average product of labor.


What is the average product of 20 workers?


What is the marginal product of the 25th worker?

1.1 units of output


2.0 units of output


Which of the following statements is true?


With which worker does diminishing marginal returns set in?



Curve A must be MPL and Curve B must be APL because:



The curve labeled A represents the MPL.


The 30th worker


when Curve A lies above Curve B, Curve B is rising, and when Curve A lies below Curve B, Curve B is falling.

When labor inputs are finely divisible, the average product of labor curve is ______ sloping at L if the marginal product is ______ the average product.


upward; below


Suppose a manager is deciding how to allocate workers between two plants. The marginal product of labor in plant 1 is 10 units of output. The marginal product of labor in plant 2 is 14 units of labor. What should the manager do?

Reallocate workers from plant 1 to plant 2, because MPL is greater in plant 2 than in plant 1.


______ are resources that are fully used up in the production process.




Materials


______ identifies all of the input combinations that efficiently produce a given amount of output.


An isoquant



Isoquants are the ______ created by the ______.




contour lines; production function



Which of the following is NOT a property of isoquants?




Isoquants may slope upward or downward.