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14 Questions

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Are You a Production Theory Pro?

Created by

@FabulousSelenite

Questions and Answers

What is the law of diminishing marginal returns?

Increases in the variable input increase the total product.

Increases in the fixed input increase the total product.

Increases in the fixed input reduce the total product.

Increases in the variable input reduce the total product. (correct)

Which of the following is a characteristic of a market with economies of scale?

Constant returns to scale

Downward-sloping long-run average cost curve (correct)

Upward-sloping long-run average cost curve

Decreasing returns to scale

When should we use relatively more labor?

When the marginal product per dollar of labor expenditures is less than a marginal product per dollar of capital expenditures.

When the cost of labor is higher than the cost of capital.

When the cost of labor is lower than the cost of capital.

When the marginal product per dollar of labor expenditures is greater than a marginal product per dollar of capital expenditures. (correct)

If a firm has increasing returns to scale, what happens when all inputs are increased by 1%?

Output increases by more than 1% Signup and view all the answers

What happens to output when a firm has increasing returns to scale?

Increasing all inputs by 1% will increase output by more than 1%. Signup and view all the answers

Which of the following is true of monopolistic competition and perfect competition?

Both types of markets have a large number of firms Signup and view all the answers

What is the long-run average cost curve when production displays economies of scale?

Downward-sloping Signup and view all the answers

What is the value of the four-firm concentration ratio that indicates the existence of an oligopoly in a particular industry?

Anything greater than 40 percent Signup and view all the answers

Will more experienced workers demand higher wages over time?

Yes Signup and view all the answers

Which of the following is an example of price discrimination?

Charging different prices to commercial and residential users Signup and view all the answers

What is the profit-maximizing output level in Figure 13-8?

22 Cases Signup and view all the answers

What is the "free-rider" problem associated with public goods?

Nonpayers cannot be excluded from using the good Signup and view all the answers

What is the reason why cartels often break down?

Each member of the cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement. Signup and view all the answers

When is a firm likely to be a natural monopoly?

When it experiences economies of scale over the full range of output Signup and view all the answers

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Description

Test your knowledge of production theory with this quiz! From the law of diminishing marginal returns to determining the most cost-effective input, this quiz covers essential concepts in economics. Challenge yourself and see how much you know about production theory.