Chapter 7

Front 1

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

Back 1

production technology

Front 2

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

Back 2

production possibilities set

Front 3

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

Back 3

efficient production frontier

Front 4

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

Back 4

production function

Front 5

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

Back 5

its production function must slope upward.

Front 6

In the short run:

Back 6

at least one input is fixed.

Front 7

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

Back 7

all inputs are variable.

Front 8

Which of the following is a short-run decision?

Back 8

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

Front 9

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?

Back 9

Q = F(L) = 50√L

Front 10

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?

Back 10

250 units

Front 11

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.

Back 11

225; 100; 1,200

Front 12

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.

Back 12

225; 225; 900

Front 13

The average product of labor is defined as:

Back 13

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

Front 14

The marginal product of labor is defined as:

Back 14

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

Front 15

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?

Back 15

4 units of output

4 units of output

fifth

1 unit of output

4.4 units of output

Front 16

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

Back 16

[F(L) - F(L - ∆L)]/∆L

Front 17

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

Back 17

F(L)/L

Front 18

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 ______.

Back 18

increase at a decreasing rate

Front 19

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

Back 19

larger; raise

Front 20

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

Back 20

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

Front 21

What is the average product of 20 workers?

What is the marginal product of the 25th worker?

Back 21

1.1 units of output

2.0 units of output

Front 22

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:

Back 22

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.

Front 23

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

Back 23

upward; below

Front 24

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?

Back 24

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

Front 25

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

Back 25

Materials

Front 26

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

Back 26

An isoquant

Front 27

Isoquants are the ______ created by the ______.

Back 27

contour lines; production function

Front 28

Which of the following is NOT a property of isoquants?

Back 28

Isoquants may slope upward or downward.