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A relationship between output on the one hand and capital and labour on the other refers to:
an average cost curve
a marginal cost curve
a production function

A relationship between output on the one hand and capital and labour on the other , where capital is fixed, refers to:
Long-run production function
Short-run production function

A relationship between output on the one hand and capital and labour on the other , where all factors are variable, refers to:
Long-run production function
Short-run production function

The diagram below shows output at different isoquants and factors, capital and labour on the two axes. What does the red line show?
Average cost curve
Long-run production function
Marginal cost curve

An equation Q = 2K +3L where K = capital and L = labour describes
a production function
a cost curve

What is a condition for a firm to minimise the production costs of a given output level?
MPK/MPL = PK/PL
MPK/MPL = APK/APL
MPK/MPL = PL/PK

If a firm hires one more unit of labour, the labour can add 3 units to production (marginal physical product). The price of one product is 5 dollars. The wage is $14. Should the firm hire the extra unit of labour?
Yes
No

A firm operates in a perfectly competitive market. The marginal product of labour is 16 units and it costs $32 to hire. The marginal product of capital is 12 units and it costs $24 to hire. The product has a price of $2.50. it has an objective to maximise profits. Should it hire...
Less of both factors?
More labour and less capital?
More of both factors?
More capital and less labour?

Assume that average product rises and then falls. What would the production function (total product, TP) looks like? Clue- when caluclating the average of anything, use the 'total' and draw a line from the origin to any point on that total curve. The red line gives you a head start. TP stands for total product. Assume that labour varies and that the capital stock is fixed.

A profict maxmising firm faces the following curves for marignal and average product. Assume that the price of the product is $1. What will be the profit maximising amount of labour to hire?
L2
L3
L1

In the diagram below, an isoquant is shown that is L-shaped ( the black line). What does this show about the production method that firms will use?
A production process where inputs like labour and capital are perfect substitutes
A production process where inputs like labour and capital are used by firms in fixed proportions
A production process where, if less and less labour is used, more and more capital must be used to substitute, due to the law of dminihsing returns

In the diagram below, an isoquant is shown that is a straight line. What does this show about the production method that firms will use?
A production process where inputs like labour and capital are perfect substitutes
A production process where inputs like labour and capital are used by firms in fixed proportions
A production process where, if less and less labour is used, more and more capital must be used as substitute, due to the law of diminishing returns

In the diagram below, an isoquant is shown that is convex to the origin. What does this show about the production method that firms will use?
A production process where, if less labour is used, more and more capital must be used to substitute, due to the law of diminishing returns
A production process where inputs like labour and capital are perfect substitutes
A production process where inputs like labour and capital are used by firms in fixed proportions

A firm faces the following constraints in terms of the amount of capital and labour required to produce successively higher amounts of output (isoquants). How can we describe this relationship?
Increasing returns to scale
Decreasing returns to scale
Increasing marginal returns
Decreasing marginal returns

Constant returns to scale lead to economies of scale
Always, since the two terms are synonomous
Never, since there is no relationship between them. One deals with the short-term and the other, the long-term
When we assume that factor prices are constant

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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