12 Questions
Based on the given information, what happens to the output Y2 when the inputs K1 and L1 are scaled by a factor z?
Y2 = zY1
If the inputs K1 and L1 are increased by 25%, what happens to the output Y2?
Y2 = 1.25Y1
If the output Y2 is greater than zY1, what can be inferred about the returns to scale?
Increasing returns to scale
According to the model, what determines the distribution of national income?
The prices per unit that firms pay for the factors of production
What does the notation W/P represent?
Real wage (measured in units of output)
According to the model, what is fixed?
Capital and labor supplies
Which one of these is the correct definition of factor prices?
Factor prices are determined by supply and demand in factor markets.
What is the basic idea behind a firm's decision to hire labor?
A firm hires each unit of labor if the benefit exceeds the cost.
What does the marginal product of labor (MPL) represent?
The additional output a firm can produce using an additional unit of labor.
Which of the following production functions exhibits diminishing marginal returns to labor?
c) 2 + 15FK + LK + L
What happens to worker productivity when labor input is increased while holding capital fixed?
b) Worker productivity decreases
What is the relationship between the marginal product of labor and labor input in the context of diminishing marginal returns?
b) The marginal product of labor decreases as labor input increases
This quiz tests your understanding of the concept of returns to scale in economics. You will be presented with a scenario where all inputs are scaled by the same factor, and you need to determine what happens to the output. Will it increase, decrease, or remain the same? Test your knowledge now!
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