11. If the capital-labor ratio changes from 100 to 150, while the marginal rate of technical substitution between capital and labor changes from 50 to 100, the elasticity of input substitution a. cannot be calculated. b. remains unchanged. c. equals 2. d. equals 0.5.
12. If a simultaneous and equal percentage decrease in the use of all physical inputs leads to a larger percentage decrease in physical output, a firm’s production function is said to exhibit a. decreasing returns to scale. b. constant returns to scale. c. increasing returns to scale. d. diseconomies of scale.
ECON 3070 Intermediate Microeconomic Theory: Practice Multiple-Choice Questions 20
13. If a firm triples all inputs, and output triples as well, the firm is subject to a. constant returns to scale. b. increasing returns to scale. c. economies of scale. d. both (b) and (c).
14. For a given short-run production function, a. technology is assumed to change as capital stock changes. b. technology is assumed to change as the labor input changes. c. technology is considered to be constant for a given production function relationship. d. technology is assumed to change positively until diminishing returns set in and then it changes in the other direction.
15. Which is a true statement? a. Decreasing returns to scale and diminishing returns to production are two ways of stating the same thing. b. Increasing returns to scale is a short-run concept, and diminishing returns to production is a long-run concept. c. Constant returns to scale is a short-run concept, and decreasing returns to scale is a long-run concept. d. All the above are true. e. None of the above is true.
16. An isocost line identifies a. the least costly combination of inputs needed to produce a given level of output. b. the relative prices of inputs. c. the technological relationships among inputs. d. the rate at which one input can be substituted for another in the production process.
17. The expansion path identifies a. the least costly combination of inputs required to produce various levels of output. b. the firm’s demand curves for the inputs. c. the various combinations of inputs that can be used to produce a given level of output. d. the least-cost combination of outputs.
18. A tangency point between an isoquant and an isocost line identifies a. the least costly combination of inputs required to produce various levels of outputs. b. the various levels of output that can be produced using a given level of inputs. c. the various combinations of inputs that can be used to produce a given level of output. d. the least costly combination of inputs required to produce a given level of output.
19. A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets. Labor costs $10 per unit LKand capital $5 per unit. For the quantities of inputs employed, MP = 2 and MP = 5. In this situation, the firm a. is producing the maximum output possible given the prices and relative productivities of the inputs. b. could lower its production costs by using more labor and less capital. c. could increase its output at no extra cost by using more capital and less labor. d. should use more of both inputs in equal proportions.
20. Suppose a firm is using two inputs, labor and capital. What will happen if the price of labor falls? a. The firm’s average cost curve will shift downward. b. The firm’s marginal cost curve will shift downward. c. To produce an unchanged output, the firm would use more labor. d. All of the above.
This question was answered on: May 23, 2022
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