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Production Function and Labor Input Quiz

12 Questions

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Production Function and Labor Input Quiz

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Questions and Answers

What does the production function describe?

The technology a firm uses to produce goods and services (correct)

The number of employees in a firm

The profit margin of a firm

The marketing strategy of a firm

How is the labor input defined in the production function?

As the total output of the firm

As the product of the number of workers hired and the average hours worked per person (correct)

As the total cost of hiring workers

As the total number of workers in the economy

What is the marginal product of labor (MPE) defined as?

The change in wages due to increased labor productivity

The change in technology used by the firm

The change in output resulting from hiring an additional worker, holding other inputs constant (correct)

The change in capital stock resulting from hiring an additional worker

What does the marginal product curve represent?

Output produced by each additional worker Signup and view all the answers

Why might the marginal product of labor be rising according to the text?

Initial gains from assigning workers to specific tasks Signup and view all the answers

What relationship does the total product curve describe?

Relationship between output and labor hired, holding capital constant Signup and view all the answers

What does the Law of Diminishing Returns state?

Successive units of input decrease output beyond a certain point. Signup and view all the answers

How is the average product of labor defined?

Output produced by the typical worker. Signup and view all the answers

What does a perfectly competitive firm maximize profits by doing?

Hiring the 'right' amount of labor and capital. Signup and view all the answers

What is the short run defined as in a firm's context?

A timeframe where capital stock is fixed at a certain level. Signup and view all the answers

How does a profit-maximizing firm determine the number of workers to hire?

By hiring workers until the wage rate equals the value of average product of labor. Signup and view all the answers

What does it mean when the value of marginal product of labor equals the wage rate?

The firm should immediately stop hiring more workers. Signup and view all the answers