微观经济学Chapter116英文习题

Chapter1

1.Economicanalysis:

involvessomesimplificationsofreality.

isonlyvaguelyrelatedtorealitybecauseifitdidsocoincide,itwouldnotstillbe

theory.

isimpossible,becauseoftheimpossibilityofacontrolledexperiment.

ifitisgoodtheory,involvesnosimplificationofreality.

involvessomuchdistortionofrealityastobeworthless.

Ans:A

Whatareeconomicgoods?

Goodsthatareveryexpensive.

Goodsthatareinscarceorlimitedsupply.

Goodsthatacountryproducesandthentradestoanothercounty.

Goodsthatarevitaltoanindividual'swelfare.

Alloftheabove.

Ans:B

"Scarcity"ineconomicsrefersbasicallyto:A)periodsoffamine.

B)monopolizationofexistingsuppliesofgoods.C)monopolizationofresourcestoprovidegoods.

monopolizationofoutletstosellgoods.

noneoftheabove.

Ans:E

"Distribution"ineconomicsrefersto:

retailing,wholesaling,andtransportation.

what.

how.

D)forwhom.

E)noneoftheabove.

Ans:D

5.Thethreequestionsofwhat,how,andforwhom:

relatetothethreefactorsofproduction.

existbecauseofscarcity.

aremoreofaprobleminamarketeconomy.

aremoreofaprobleminacommandeconomy.

arenolongerrelevant.

Ans:B

6.Thedescriptionofeconomicsas,"coolheadsintheserviceofwarmhearts",meansthat:A)allocatingscarceresourcesmayrequirepainfuldecisions.

costsandbenefitsneedtobeweighedobjectively.

theproperbalancemustbestruckbetweenthedisciplineofthemarketandthegenerosityofthewelfarestate.D)alloftheabove.

E)noneoftheabove.

Ans:D

7.Whenmovingalongaproductionpossibilitiesfrontier,theopportunitycosttosocietyofobtainingmoreofoneofthetwogoods:A)ismeasuredindollarterms.

usuallydecreasesasmoreofthegoodisproduced.

ismeasuredbytheamountoftheothergoodthatmustbegivenup.

ismeasuredbytheadditionalresourcesthatmustbeusedtoproducethegood.

isusuallyconstant.

Ans:C

8.Thesedatareflectthreepossiblecombinationsoffoodandnothingthatcanbeproducedfromgivensetofresources.

Food1050

ClothingOX50

Refertotheabovedata.Ifbothclothingandfoodalwaysuseallinputsinthesameproportion,thenXmustbe:

25.

morethan25.C)lessthan25.

50.

cannotnotbedeterminedfromthedata

Ans:A

Beingontheproduction-possibilityfrontierbetweengunsandbuttermeansthat:A)itisimpossibletoproduceanymoreguns.

itisimpossibletoproduceanymorebutter.

moregunscanbeproducedonlybydoingwithoutsomebutter.

populationisinequilibrium.

ifsocietybecomesmoreproductiveinproducingbutter,thenwecanhavemorebutter

butnotmoreguns.

Ans:C

Ashiftinaproduction-possibilityfrontiercanresultfrom:A)unemployment.

inflation.

changesinproductiontechniques.

changesinthecombinationofgoodsproduced.

changesinconsumers'tastes.

Ans:C

11

Figure1-1

Whichpointontheproduction-possibilityfrontiersdrawninFigure1indicatesnoconsumptiongoodsbeingproduced?

A.

B.

C.

D.

E.

Ans:E

12.Ofthefollowingpoints,whichpointreflectsthemostefficientuseofavailableresourcerelationtofrontierAEinFigure1-1?

F.

G.

C.

H.

Cannottellfromtheinformationprovided.

Ans:C

13.RelativetofrontierA'E'inFigure1-1,whichofthefollowingpointsisleastefficient?A)B'.

C'.

B.

C.

F.

Ans:E

PointAonwhichpanelinFigure1-2representsaninefficientuseofresources?A)PanelA.

PanelB.

PanelC.

PanelD.

PanelE.

Ans:D

Foratheorytobeuseful,itmustbeconfirmedineachtestcase.

Ans:False

CHAPTER2

Inamarketsystem,thewhatdecisionismademostbasicallybyA)representativegovernment.

nationalplanning.

bankers.

advertisersandtheirabilitytopersuadebuyers.

spendingdecisionsofthosewithmoney.

Ans:E

Inamarketeconomy,thepresumedharmonybetweenindividualandpublicinterestdependsupon:

thegoodwillofprivatebusinesspeople.

carefulplanningandcoordinationofeconomicactivity.

altruismonthepartofconsumers.

competitivemarketsandthepursuitofself-interestbyindividuals.

thewisdomofgovernmentdecisions.

Ans:D

Pollutioncontrolpolicyisdirectedfirstandforemostatimproving:A)equity.

efficiency.

stability.

alloftheabove.E)noneoftheabove

Ans:B

Whoisinchargeofamarketeconomy?Thatis,whatagentsandfactorsarethemostimportantindeterminingmarketoutcomes?A)Largecompanies.

Congressandthepresident.

Consumersalone.

Allproducers.

Consumersandtechnology.

Ans:E

Theprincipleofthe"invisiblehand"claimsthat:

theselfishpursuitsofeveryone'sowninterestwillleadtothebestgoodforallunmarketcompetition.

governmentmustgentlyguideeconomicactivitysothatthebestforallwillbeattained.

governmentpoliciesworklikeaninvisiblehand,steeringresourcestotheirbestuse.

producersmustquietlycooperatesothatpricesarenotsolowastocauselosses.

noneoftheabove.

Ans:A

Consumersvotetheirdollarsprimarilyin:A)labormarkets.

landmarkets.

capitalmarkets.

goodsmarkets.

noneoftheabove.

Ans:D

Whichofthefollowingstatementsistrueofspecialization?

Specializationisinconsistentwiththeideaofindividualfreedom.

Economiesthatpracticeadivisionoflaboraremorallysuperiortothosethatdonot.

Inacceptingspecialization,apersonsacrificeshisorherowninterestsforthesakesociety'sinterest.

Whilespecializationhasenormousadvantages,thecostsoutweighthem.

Increasedproductivityismorelikelytobeachievedthroughspecialization.

Ans:E

Whichofthefollowingisnotanexampleofgovernmentregulationdesignedtocurbanegativeexternality?

Anti-childlaborlaws.

Anti-pollutionlaws.

Anationalsalestax.

Legislationagainststripmining.

TheCleanAirAct.

Ans:C

PricesinfactormarketsareprimarilydeterminedbyA)governmentregulation.

bigbusinesscollusion.

theinteractionofbusinesssupplywithouthouseholddemand.

theinteractionofhouseholdsupplywithbusinessdemand.

noneoftheabove.

Ans:D

Aneconomydominatedbyimperfectcompetitionischaracterizedby

toomuchoutput,andlowpricescomparedtoperfectcompetition.

sameamountofoutput,andlowpricescomparedtoperfectcompetition.

toolittleoutput,andlowpricescomparedtoperfectcompetition.

toolittleoutput,andhighpricescomparedtoperfectcompetition.

toomuchoutput,andhighpricescomparedtoperfectcompetition.

Ans:D

Whichofthefollowingisthekeyrequirementforimperfectcompetition?A)Advertising.B)Manybuyers.

Manysellers.

Abilityofabuyerorsellertoaffectagood'sprice.

Governmentpolicies.

Ans:D

Ofthethreebasicproblemsinourmoderneconomy,pricesinamarketsystemsolve:A)whatandforwhom,butphysicalscientistssolvehow.

whatandhow,butforwhomisdeterminedbysocialscientists.

howandforwhom,butCongresssolvesthewhat.

eachoftheabove,andnotwoarecontradictory.

noneoftheaboveisaccurate.

Ans:E

Whichofthefollowingwouldbestdetermine,inamarketeconomy,theanswertotheforwhomquestion?

Fairness.

Internationaltradepatterns.

Pricingoffactorsofproductionthatpeopleown.

Costminimization.

Consumers'tastesandneeds.

Ans:C

Howgoodsareproducedisdeterminedby:A)consumerdemand.

governmentinterventiontoforcebusinessestoproducegoodscheaply.

bigbusinessactivity.

businesscompetitiontobuyfactorinputsandsellgoodsmostcheaply.

noneoftheabove.

Ans:D

A"mixedeconomymayinvolvebothperfectandimperfectcompetition.

Ans:True

CHAPTER3

1.IfEweretheoldequilibriuminthemarketforwheatinthefigurebelow,andE'thenewonwhichofthefollowingcouldhavecausedthechange?

Consumerincomerose,causingasupplyshift.

Badweathercausedasupplyshift.

Consumerincomerose,causingademandshift.

Supplyanddemandbothshifted.

Noneoftheaboveareplausibledescriptions.

Ans:C

Thedemandcurveforanormalgoodwillshifttotheleftif:A)incomeincreases.

populationincreases

thepriceofasubstitutegooddecreases.

alltheabove.

noneoftheabove.

Ans:C

Apriceatwhichtheamountpeoplewishtobuyexceedstheamountthatpeoplewishtoproduce(givenupward-slopingsupplycurves):

liesabovetheequilibrium,marketclearingprice.

liesbelowthemarketclearingprice.

willinduceashiftinthedemandscheduletoachieveequilibrium.

isimpossible.

isnoneoftheabove.

Ans:B

AnincreaseinthesupplyofcommodityXforanygivenpriceofXcouldbeexpectedtobecausedby

anincreaseinthepricesofothercommodities.

anincreaseinthepricesoffactorsofproductionimportanttothiscommodity.C)areductioninthepricesoffactorsofproductionimportanttothiscommodity.

anincreaseinconsumerincome.

noneoftheabove.

Ans:C

GiventhesupplyanddemandcurvesdrawnforanormalgoodinFigure3-2,anincreaseinincomecanbeexpectedtocause:

equilibriumpriceandquantitytoincrease.

equilibriumpricetoincreaseandequilibriumquantitytofall.

equilibriumpricetoincreasewhileequilibriumquantityholdssteady.

equilibriumpriceandquantitytofall.

equilibriumpricetofallandequilibriumquantitytoclimb.

Ans:A

LetP*andQ*representmarketclearingpriceandquantity,respectively.GiventhesupplyanddemandcurvesdrawninFigure3-2,anincreaseinthepriceofaninputemployedintheproductionofQcanbeexpectedtocause:A)P*andQ*toclimb.

P*toclimbwhileQ*falls.

P*toclimbwhileQ*holdssteady.

P*tofallwhileQ*climbs.

P*andQ*tofall.

Ans:B

Anincreaseinpricewillleadtoalowerquantitydemandedbecause:

supplierswillsupplyonlythesmalleramount.

qualitydeteriorates.

peoplewillpurchaselessofthegood.

alloftheabove.

noneoftheabove.

Ans:C

Upward-slopingsupplycurvesaretheresultof:A)increasingreturnstoscale.

increasingcostsofproduction.C)changesingovernmentpolicies.

changesintechnology.

noneoftheabove

Ans:E

Supposethatatthecurrentmarketprice,theamountwhichproducerswishtoproduceandselexceedstheamountthatconsumerswishtopurchase.Thisprice:A)liesabovethemarketclearingprice.

liesbelowthemarketclearingprice.

isimpossible.

willinduceashiftinthedemandschedule.

noneoftheabove.

Ans:A

Inacompetitivemarket,themarketclearingquantityisdeterminedprimarilyby:A)thesupplyofthegood.

thecostofproducingthegoodinquestion.

theinteractionofsupplyanddemand.

thedecisionsofthebuyersastohowmuchtheyarewillingtopay.

alloftheabove.

Ans:E

LetP*andQ*inFigure3-4representmarketclearingpriceandquantity,respectively.GiventhesupplyanddemandcurvesdrawninFigure3-4,areductioninthepriceofasubstitutegoodforcanbeexpectedtocause:

P*andQ*toclimb.

P*toclimbwhileQ*declines.

P*toclimbwhileQ*holdsfixed.

P*tofallwhileQ*climbs.

P*andQ*tofall.

Ans:E

11

.

LetP*andQ*representmarketclearingpriceandquantity,respectively.GiventhesupplyanddemandcurvesdrawninFigure3-4,areductioninthepriceofaninputusedintheproductiofQcanbeexpectedtocause:A)P*andQ*toclimb.

P*toclimbwhileQ*falls.

P*toclimbwhileQ*holdssteady.

P*tofallwhileQ*climbs.

P*andQ*tofall.

Ans:D

Assumethatautomotiveworkersgoonstrike,sothattheproductionofcarsfalls.GiventhesupplyanddemandcurvesinFigure3-5,whichofthefollowingwouldresultincomparisontotheinitialequilibriumposition?

Pricesfall,Quantityfalls

Pricesrise,QuantityfallsC)Pricesrise,QuantityrisesD)PricesandQuantitydonotchange.

E)Noneoftheabove.

Ans:B

AssumethatArepresentsdemandforcarsandBrepresentssupplyofcars.IfA:P=10,000-2QandB:P=6000+2Q,theequilibriumpriceandquantityare:

P=1000,Q=8000

P=800,Q=100

P=8000,Q=1000

P=100,Q=800

Noneoftheabove.

Ans:C

Anincreaseindemandmeansamovementtoahigherpricealongagivendemandcurve.

Ans:False

CHPATER4

RankthepointsA,BandConthedemandcurveinthefigurebelowinorderofgreatesttoleelasticityofdemand.A)C,A,B.

B,A,C.

A,B,C.

Theyareofequalelasticity.

Moreinformationisneeded.

Ans:C

Anincreaseinsupplywilllowerpriceunless:A)supplyisperfectlypriceinelastic.

demandisperfectlypriceelastic.

itisfollowedbyareductioninquantitydemanded.

demandishighlypriceinelastic.

bothdemandandsupplyarehighlypriceinelastic.

Ans:B

Astraight-linedemandcurvehaswhichofthefollowingproperties?A)Constantslopeandvaryingpriceelasticity.

Constantincomeelasticitywithvaryingslope.

Varyingslopeandvaryingcrosselasticity.

Constantslopeandconstantpriceelasticity.

Noneoftheabovemaybeassertedingeneral.

Ans:A

Iftheburdenofanexcisetaxisshiftedforwardcompletelyontotheconsumer,wecansaythaA)supplyisperfectlypriceelastic.B)demandisperfectlypriceelastic.

demandismorepriceelasticthansupply.

supplyispriceinelasticanddemandispriceelastic.

noneoftheabove.

Ans:A

In"tight"housingmarkets,rentcontrolsareoftenappliedtoholdthepriceofhousingtoa"reasonable"level.Whatistheimmediateeffectofthispricepolicywithrespecttotheallocativefunctionsofprices,andtherelativeincomesoftenantsandlandlords?

Theallocativefunctionofpricesisimpaired,butthetenantsarepreventedfromgaininattheexpenseofthelandlords.

Theallocativefunctionofpricesisnotimpaired,andthetenantsarepreventedfromgainingattheexpenseoflandlords.

Theallocativefunctionofpricesisimpaired,andthetenantswhofindhousinggainatheexpenseoflandlords.

Theallocativefunctionofpricesisnotimpaired,butthelandlordsgainattheexpensetenantswhodonotfindhousing.E)Noneoftheabove.

Ans:C

ThepriceelasticityofsupplyshowninFigure4-8betweenpointsAandBis:

.1.

.5.

1.

5.

noneoftheabove.

Ans:C

Supposethatsuccessivepricereductionsreducetotalrevenue.Thesupplierfacesademandcurvethatis,inthisregion:A)priceelastic.

unitaryelastic.

infinitelypriceelastic.

indeterminate.

priceinelastic.

Ans:E

"Ifitsadvocatesarecorrect,theminimum-wagebillpassedbytheHouseofRepresentativeswouldraisewagesfornearly7millionunderpaidworkers,butwouldhavenonoticeableeffectonemployment."Thequotationimpliesthatthedemandforthelaborservicesofthe7millionworkersmentioned,withrespecttothepriceoflaborservices,haselasticityequalto:

2.

5.

1.

0.

.5

Ans:D

Ahorizontaldemandcurvemaybedescribedas:A)relativelypriceelastic.

perfectlypriceinelastic.

relativelypriceinelastic.

perfectlypriceelastic.

unitelastic.

Ans:D

fagoodisinfixedsupply,thentheincidenceofataxA)fallsentirelyontheconsumers.

fallsmostlyontheproducersandpartlyonconsumers.

fallsentirelyontheproducers.

dependsontheelasticityofdemand.

noneoftheabove.

Ans:C

RefertotheFigure4-13.WhatistheelasticityofthedemandcurveDDbetweenpointsAandB?

3.67

1.8

1.0

0.56

Noneoftheabove

Ans:A

RefertoFigure4-13.WhatistheelasticityofthedemandcurveDDbetweenpointsBandC?

3.33

1.8

1.0

0.56

Noneoftheabove

Ans:B

RefertoFigure4-13.WhatistheelasticityofthedemandcurveDDbetweenpointsCandD?

3.33

1.8

1.0

0.56

Noneoftheabove

Ans:C

Ifatapriceof$8,quantityboughtwillbe3300perday,andat$12,quantityboughtwil2700perday,thenthepriceelasticityofdemandisapproximately:

0.4

0.5

0.7

2.0

2.5

Ans:B

Givenarelatively,butnotperfectly,priceelasticsupplycurve,anincreaseindemandwillcertainly:

raisepricebutleavequantitysoldunchanged.

raisepriceandincreasequantitysold.

lowerprice,sincesupplycannotincreaseexceptthroughtheinducementofhigherprice.

reducequantitysoldbutleavepriceunchanged.

dononeoftheabove,since"increaseindemand"referstoamovementalongagivendemandcurve.

Ans:B

CHAPTER5

Inthefigurebelow,thedropinconsumersurplusresultingfromanincreaseinpricefrom510isgivenbythearea:

FGH

CEH

FGDC

CEGF

DEG

Ans:D

Achangeinwhichofthefollowingshouldnotaffectthedemandforhotcoffee?A)Thepriceofcoffee.

Thepriceoftea.

Consumerincomes.

Theweather.

Alltheaboveaffectthedemandforcoffee.

Ans:A

Theparadoxofvaluenotesthat:

thereisnorationalexplanationwhypeopleshouldsetahighvalueonobjectssuchasdiamonds,whichhavelittlerealusefulness.

thepriceobtainedfromsellinganycommoditymaybearlittlerelationshiptothecostoproducingit.

supplyanddemandcurvesdoverylittletoexplainhowvalue(orprice)isdetermined.D)nooneconsumerhasanycontrolovertheprice(orvalue)ofacommodity,butconsumerscollectivelydohavesuchcontrol.

E)thereisnoconsistentrelationshipbetweenthetotalutilityobtainedfromanycommodityandthepricechargedforit.

Ans:E

Tobeinequilibrium(i.e.,tomaximizesatisfaction),theconsumermust:A)purchasenoinferiorgoods.

B)equalizethemarginalutilitiesofthelastunitpurchasedofeverycommodity.C)besurethatthepricesofallcommoditiespurchasedareproportionaltotheirtotalutilities.

besurethatthepriceofeachgoodisequaltothemarginalutilityofmoney.

allocateincomesothatthelastpennyspentonanygoodgeneratesthesameincrementofutilityasthelastpennyspentonanyothergood.

Ans:E

IfIget10unitsoftotalutility(TU)from2oranges,14ofTUfrom3oranges,and17offrom4oranges,Iobeythelawofdiminishingmarginalutilitybecause:A)MUfallsasconsumptionincreases.

TUincreasesasconsumptionincreases.

TU>MU.D)MU>TU.

E)MU=TU.

Ans:A

Foranormalgood,thesubstitutioneffectofapriceincrease:

pushesthequantitydemandeddownalongwiththeincomeeffect.

pushesthequantitydemandeddownenoughthattheincomeeffectcannotpushdemandhigher.

pushesthequantitydemandedup,butnotenoughtodominateanincomeeffectthatultimatelypushesdemanddown.

hasaneffectonthequantitydemandedthatisidenticaltotheincomeeffect.

pushesthequantitydemandedupalongwiththeincomeeffect.

Ans:A

Table5-1

TotalUtility

Units12345

GoodX120216288336360

GoodY90160220270305

RefertoTable5-1.IfgoodXcosts$6perunitandgoodYcosts$5perunit,atwhatquantitiofXandYisutilitymaximizedifthebudgetis$31?

X=2,Y=3

X=4,Y=5

X=3,Y=4

X=3,Y=3

Noneoftheabove

Ans:D

RefertoTable5-1.SupposenowXcosts$8perunitandYcosts$5perunit.ForwhatamountsofXandYare(marginalutility)/priceequal?

X=3,Y=4

X=4,Y=5

X=2,Y=3

X=1,Y=2

Noneoftheabove

Ans:C

RefertoFigure5-6.WhatistotalmarketdemandatP=5?

A)0

TOC\o"1-1"\h\z\u

\h

B)

5

\h

C)

10

\h

D)E)Noneoftheabove

15

Ans:B

SupposeMaryiscurrentlyspendingallherincomeoncookiesandmilk.Themarginalutilityofcookiesis15,thepriceofcookiesis$5,themarginalutilityofmilkis10,andthepriceis$1.Toincreasehertotalutility,Maryshould:A)buymorecookiesandlessmilk.

buymoremilkandfewercookies.

buymoreofbothgoods.

buylessofbothgoods.

donothing.Sheiscurrentlymaximizingutilitywithherlimitedbudget.

Ans:B

Theincomeeffectdescribes:

thepercentagechangeinconsumptionofagoodgivensomepercentagechangeinthepriceofanothergood.

thefactthatwhenthepriceofagoodfalls,consumerswillsubstituteitintotheirmabasketsinplaceofrelativelymoreexpensivegoods.

thefactthatwhenthepriceofagoodfalls,consumerswillhavemorepurchasingpowerwiththesamenominalincome.

theeffectofachangeinconsumerincomeonthequantityofagooddemanded.

anupward-slopingdemandcurve.

Ans:C

Assumehouseholdincomeis$30,thepriceofXis$6andthepricRefertotableofYis$3.

5-2.WhatquantitiesofXandYwillbepurchasedbythehousehold?

MarginalUtility

Units1234567

GoodX7248302418126

GoodY604230151052

X=2,Y=6

X=3,Y=4

X=3,Y=3

X=4,Y=2

Noneoftheabove

Ans:B

Agoodwhichsellsforahigherpricethanonewhichismoreimportantforwelfarereflectsconceptof:

complementarityindemand.

substitution.

marginalortotalutility.

theparadoxofvalue.

lawofdiminishingmarginalutility.

Ans:D

Atmyequilibriumdemandchoicesforgoods1and2:

MU1=MU2

MU1/Q1=MU2/Q2

MU1/P1=MU2/P2

P1=P2

noneoftheabove.

Ans:C

TheruleforrationalbudgetallocationbyaconsumeristhatthemarginalutilityofeachgoA)purchaseddividedbyitspricemustbeequal.

purchasedmultipliedbyitspricemustbeequal.

mustbezero.

mustbeinfinite.

noneoftheabove.

Ans:A

CHAPTER6

Themarginalproductoflaboristhe:

outputwhichitcouldproduceunaidedbymachineryorotherfactorsofproduction.

extrarevenuewhichafirmwillgetbysellingtheoutputofoneadditionalworker.C)amountofextraoutputthatisproducedwhenoneextraworkerisaddedtoafixedamountofotherfactors.

D)amountofextraoutputthatisproducedwhenoneworkerisaddedandotherfactorsofproductionareincreasedproportionately.E)noneoftheabove.

Ans:C

TotalProductwith

VariousInputCombinations

Land

Labor101520

000

2020.6720.5

3839.3340.0

5457.0058.5

6872.6776.0

8087.3392.5

90102.00108.0

Supposethatproductionisdefinedbythefunctionrecordedinthetableabove.Themarginalproductofthe4thunitoflabor,given20unitsofland,isequalto:

15.5

17.5

19.0

1.5

noneoftheabove

Ans:B

Supposethatproductionisdefinedbythefunctionrecordedinthetableabove.Given6unitsoflabor,themarginalproductofincreasinglandfrom10unitsto15unitsisequalto:

15.

12.

3.

2.4.

noneoftheabove.

Ans:D

Supposethatproductionwererepresentedbytheproductionfunctiondisplayedinthetableabove.Youwouldconcludethat:

landdisplayeddiminishingreturns.

labordisplayeddiminishingreturns.

productiondisplayedconstantreturnstoscale.

alloftheaboveweretrue.

noneoftheaboveweretrue.

Ans:D

Thelawofdiminishingreturnsisexpressedintermsofaneventualdeclineinthe:A)totalproductofaninput.

averageproductofaninput.

marginalproductofaninput.

returnstoscaleofaninput.

broadestgeneralproductivitymeasuresonly.

Ans:C

Theshortrunisaperiodoftimesoshortthat:A)outputcannotbevaried.

atleastoneinputisfixed.

allinputsarefixed.

allinputsarevariable.

noneoftheabove.

Ans:B

Forthelawofdiminishingreturnstohold,themissingblankinthistablemustbe:

QuantityTotalofLaborProduct

001-

28

4.

2.

morethan4.D)lessthan4.

E)0.

Ans:C

Supposethatyouhavedrawnatotalproductcurveforlaborgivenaspecifictechnology.Nowletsomesortoftechnologicalchangeincreasetheproductivityoflabor.Anewtotalproductcurvewouldhavetobedrawn:

abovetheoldwithasteeperslopeforanylevelofemploymentgreaterthanzero.B)abovetheoldwithaflatterslopeforanylevelofemploymentgreaterthanzero.C)belowtheoldwithasteeperslopeforanylevelofemploymentgreaterthanzero.

D)belowtheoldwithaflatterslopeforanylevelofemploymentgreaterthanzero.E)directlyovertheoldcurvesignifyingnochangeinthetotalproductgraph;onlythemarginalproductgraphwouldchange.

Ans:A

Supposethatproductionofaparticulargoodrequirestwoinputs,labor(L)andcapital(K).IfKisfixed,whichofthepanelsinFigure6-2possiblyrepresent(s)decreasingmarginalproductivityoflabor?A)Panela.

Panelb.

Panelc.

Alloftheabove.

Noneoftheabove.

Ans:B

Supposethattwoinputs,KandL,arevariableandincreaseatthesamerate.WhichoneofthepanelsinFigure6-2representsIncreasingReturntoScale(IRS)?A)Panela.

Panelb.

Panelc.

Paneld.

Noneoftheabove.

Ans:C

Theproductionfunctionisatechnicallawwhich:A)relatesdollarinputstodollaroutputs.

indicatesthebestwaytocombineoutputsinthemarketplace.

indicatesthebestlevelofoutputtoproduce.

describesarelationshipbetweeninputsandoutputinaproductionprocess.

relatesmarginalproductstofactorprices.

Ans:D

Averageproductoflabormeasures:

theadditiontototaloutputwhenanadditionalworkerishired.

totalproductdividedbytotalcost.

themarginalproductofthelastworkermultipliedbythewagerate.

totalproductdividedbythewagerate.

totalproductdividedbythequantityoflabor.

Ans:E

Theemploymentofwhichofthefollowinginputsmightbeadjustedintheshortrun?A)Physicalcapital.

Numberofhoursworkedbylabor.

Unitsofenergyrequiredperunitoutput.

Unitsofmaterialrequiredperunitoutput.

Noneoftheabove.

Ans:B

Whenwilltheaverageproductoflabor