Lesson test: Production

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Production

1.[2p]
What distinguishes the short run from the long run?

At least one input is fixed in the short run and all vary in the long run

Correct

The short run is under one year and the long run is over one year

The answer is: At least one input is fixed in the short run and all vary in the long run

The short run holds prices fixed and the long run lets them adjust

The answer is: At least one input is fixed in the short run and all vary in the long run

The short run applies to small firms and the long run to large ones

The answer is: At least one input is fixed in the short run and all vary in the long run

2.[2p]
A workshop has $q = 30 L^{2} - L^{3}$ . What is the marginal product of labour at $L = 18$ ?

CorrectNot quite: 108

3.[3p]
For the same workshop, at how many workers is average product at its maximum?

CorrectNot quite: 15

4.[1p]
Average product is rising exactly when marginal product exceeds average product.

True

Correct

False

The answer is: True

5.[2p]
A firm has $q = 5 L^{0.4} K^{0.8}$ . What returns to scale does it show?

Increasing, since the exponents sum to more than one

Correct

Constant, since both exponents are positive

The answer is: Increasing, since the exponents sum to more than one

Decreasing, since each exponent is less than one

The answer is: Increasing, since the exponents sum to more than one

It cannot be determined without knowing input prices

The answer is: Increasing, since the exponents sum to more than one

6.[3p]
A firm has $q = \sqrt{L K}$ , a wage of £20 and a capital rental of £80, and must make 100 units. How many units of labour does it hire?

CorrectNot quite: 200

7.[3p]
Which statements about diminishing marginal returns are correct?

Select all that apply

It is a statement about varying one input while others are held fixed

Correct

It says the marginal product eventually falls, not that it falls from the first unit

Correct

It is an empirical regularity rather than a theorem

Correct

It is the same thing as decreasing returns to scale

The answer is: It is a statement about varying one input while others are held fixed, It says the marginal product eventually falls, not that it falls from the first unit, It is an empirical regularity rather than a theorem

8.[2p]
Cobb and Douglas fitted $q = 1.01 L^{0.75} K^{0.25}$ to United States manufacturing for 1899 to 1922. What does that imply?

Constant returns to scale, since the exponents sum to one

Correct

Increasing returns to scale, since the constant exceeds one

The answer is: Constant returns to scale, since the exponents sum to one

Decreasing returns to scale, since each exponent is below one

The answer is: Constant returns to scale, since the exponents sum to one

Nothing about scale, since the data were a time series

The answer is: Constant returns to scale, since the exponents sum to one

9.[3p]
Match each condition to what it characterises.

${MP}_{L} / {MP}_{K} = w / r$
${MP}_{L} = 0$
${MP}_{L} = {AP}_{L}$
$α + β > 1$

least-cost input mix
total output at its maximum
increasing returns to scale
average product at its maximum

Show the answer

${MP}_{L} / {MP}_{K} = w / r$ : least-cost input mix ${MP}_{L} = 0$ : total output at its maximum ${MP}_{L} = {AP}_{L}$ : average product at its maximum $α + β > 1$ : increasing returns to scale

1.[2p] What distinguishes the short run from the long run?

2.[2p] A workshop has q=30L2−L3. What is the marginal product of labour at L=18?

3.[3p] For the same workshop, at how many workers is average product at its maximum?

4.[1p] Average product is rising exactly when marginal product exceeds average product.

5.[2p] A firm has q=5L0.4K0.8. What returns to scale does it show?

6.[3p] A firm has q=LK, a wage of £20 and a capital rental of £80, and must make 100 units. How many units of labour does it hire?

7.[3p] Which statements about diminishing marginal returns are correct?

8.[2p] Cobb and Douglas fitted q=1.01L0.75K0.25 to United States manufacturing for 1899 to 1922. What does that imply?

9.[3p] Match each condition to what it characterises.

1.[2p]
What distinguishes the short run from the long run?

2.[2p]
A workshop has $q = 30 L^{2} - L^{3}$ . What is the marginal product of labour at $L = 18$ ?

3.[3p]
For the same workshop, at how many workers is average product at its maximum?

4.[1p]
Average product is rising exactly when marginal product exceeds average product.

5.[2p]
A firm has $q = 5 L^{0.4} K^{0.8}$ . What returns to scale does it show?

6.[3p]
A firm has $q = \sqrt{L K}$ , a wage of £20 and a capital rental of £80, and must make 100 units. How many units of labour does it hire?

7.[3p]
Which statements about diminishing marginal returns are correct?

8.[2p]
Cobb and Douglas fitted $q = 1.01 L^{0.75} K^{0.25}$ to United States manufacturing for 1899 to 1922. What does that imply?

9.[3p]
Match each condition to what it characterises.