final practice questions Flashcards
which of the following would NOT be a factor of production in a bakery
- flour
- ovens
- labor
- advertising
advertising
the short run is
a period of time during which some inputs can be varied and some cannot
a production input that can be varied in both the short run and the long run is call
a variable input
a production input that can only be varied in the long run is called
a fixed input
what is production technology and how does it differ from a production function?
It is a function showing the highest output that a firm can produce for every specified combination of inputs and is the same as a production function
why does production eventually experience diminishing marginal returns to labor in the short run
since at least one factor of production is fixed in the short run, as more and more workers must share the fixed factors, the marginal product of each additional worker will eventually decrease
faced with constantly changing conditions, why would a firm ever keep any factors fixed? what criteria determine whether a factor is fixed or variable?
some factors are fixed in the short run, whether the firm likes it or not, simply because it takes time to adjust the level of the variables
a political campaign manager must decide whether to emphasize television ads or letters to potential voters in a reelection campaign. describe the prod function for campaign voters
television ads and letter produce campaign votes
How might info about a production function (such as the shape of the isoquants) help the campaign manager plan strategy
if ads and letters to potential voters are perfect substitutes, then the campaign manager should use only the cheaper input per vote
holding capital constant, when the amount of labor increases from 5 to 6, output increases from 20 to 25. then when labor increases from 6 to 7, output increases from 25 to 28- example of what?
law of diminishing marginal returns
holding capital constant, when labor increases from 9 to 10 units, output increases from 200 to 216 units. the marginal product of labor is ___ units, and when 10 units of labor are used, the average product of labor is ___
16, 21.6
what is the difference between a prod function and an isoquant
a prod funtion describes the max output that can be achieved with any given combo of inputs. an isoquant identifies all the different combos of inputs that can be used to produce one particular level of output
can an isoquant ever slope upward?
no, it would imply that adding more of both inputs keeps output constant
if a prod function has straight line isoquants, then
the inputs are perfect substitutes
a firm wants to minimize the total cost of producing 100 tons of dynamite. the firm uses two factors of production, chemicals and labor. the combo of chemicals and labor that minimizes production costs will be found where
the prod of an additional unit of dynamite costs the same regardless of whether chemicals or labor are used
With convex isoquants, a firm’s expansion path cannot be negatively sloped
true or false?
true
If a firm uses only two factors of production, one of whose marginal product becomes negative when its use exceeds a certain level, then a cost-minimizing firm’s expansion path will have vertical or horizontal segments
true or false?
true
suppose capital and labor are perfect substitutes in a long-run production process. if labor costs $15 per hour and the rental rate of capital is $20 per hour, what can we say about the profit maximizing choice of labor and capital inputs?
we will only use the labor in the prod process
