Scribd
Upload
12 views

Tutorial_Chapter_6

This document is a tutorial chapter on production, covering key concepts such as production functions, short-run production, marginal and average products, and isoquants. It includes multiple-choice questions and exercises related to the production functions of coffee shops and cheese production. The chapter aims to enhance understanding of production theory and its applications in economics.

Uploaded by

sanfilippoaurora99
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
12 views

Tutorial_Chapter_6

This document is a tutorial chapter on production, covering key concepts such as production functions, short-run production, marginal and average products, and isoquants. It includes multiple-choice questions and exercises related to the production functions of coffee shops and cheese production. The chapter aims to enhance understanding of production theory and its applications in economics.

Uploaded by

sanfilippoaurora99
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

Tutorial Chapter 6 - Production

∗
Guido Pialli

January 22, 2021

∗
[email protected]

1
Multiple choices
1. A production function indicates the maximum output per unit of time that a
rm can produce, for every combination of inputs, with a given:
A. Cost of production
B. Technology
C. Prot
D. Labour input
E. None of the above

2. The short run is:


A. Less than a year.
B. Three years.
C. However long it takes to produce the planned output.
D. A time period in which at least one input is xed.

3. The slope of the total product curve is the:


A. Average product.
B. Slope of a line from the origin to the point.
C. Marginal product.
D. Marginal rate of technical substitution.
E. Marginal cost.

4. Joe owns a small coee shop, and his production function is q = 3KL where q
is total output in cups per hour, K is the number of coee machines (capital), and
L is the number of employees hired per hour (labor). If Joe's capital is currently
xed at K = 3 machines, what is his short-run production function?
A. q = 3L.
B. q = 3L2 .
C. q = 9L.
D. q = 3K 2 .

5. In the short run, when labour usage is at 12 units, output is 36 units. From
this we may infer that:
A. The marginal product of labour is 3.
B. The production function exhibits decreasing returns to scale.
C. The total product of labour is 1/3.
D. Impossible to say if the level of capital is unknown.
E. The average product of labour is 3.

6. Joe owns a coee house and produces coee drinks under the production
function q = 5KL where q is the number of cups generated per hour, K is the
number of coee machines(capital), and L is the number of employees hired per
hour(labour). What is the marginal product of labour?
A. M PL =5.
B. M PL =5K.
C. M PL =5L.
D. M PL =5K/L.
E. M PL =10K.

7. An isoquant:
A. Must be linear.
B. Cannot have a negative slope.
C. Is a curve that shows all the combinations of inputs that yield the same total
output.
D. Is a curve that shows the maximum total output as a function of the level of
labor input.
E. Is a curve that shows all possible output levels that can be produced at the
same cost.

8. An L-shaped isoquant:
A. Is impossible.
B. Would indicate that the rm could switch from one output to another cost-
lessly.
C. Would indicate that the rm could not switch from one output to another.
D. Would indicate that capital and labor cannot be substituted for each other in
production.
E. Would indicate that capital and labor are perfect substitutes in production.

9. The rate at which one input can be reduced per additional unit of the other
input, while holding output constant, is measured by the:
A. Marginal rate of substitution.
B. Marginal rate of technical substitution.
C. Slope of the isocost curve.
D. Average product of the input.
E. Marginal product.
10. In a production process, all inputs are increased by 10%; but output increases
less than 10%. This means that the rm experiences:
A. Decreasing returns to scale.
B. Constant returns to scale.
C. Increasing returns to scale.
D. Negative returns to scale.

Exercises
Exercise 1
Fill in the gap in the table below:

Quantity Total Marginal product Average product


of labour output of variable input of variable input
0 0
1 150
2 200
3 200
4 760
5 150
6 150

Exercise 2
√
The production function of cheeses for "l'antica casera" is y(K, L) = 4 KL.
K represents the number of machinery "l'antica casera" uses and it is xed in
the short run and equal to 4. L represents the number of labour hours "l'antica
casera" employs and it is variable in the short and long-run.

1. Compute "l'antica casera" marginal productivity of labour and the marginal


productivity of capital.
2. Using the derived M PL and M PK ll in the empty columns in the table
below.

Cheeses K L M PL M PK
4 1
4 4
4 9
4 16

3. If l'"Antica Casera" purchases extra heater to be used in the cheese pro-


duction and adopts a new labour organization scheme, the number of cheeses
√
that can be produced in a day becomes y(K, L) = 8 L · K . Are the marginal
productivity of labour and capital aected by this change?

Exercise 3
√
Bridget's Brewery production function is given by y(K, L) = 2 KL where K is
the number of vats she uses and L is the number of labor hours. Does this produc-
tion process exhibit increasing, constant or decreasing returns to scale? Holding
the number of vats constant at 4, is the marginal product of labor increasing,
constant or decreasing as more labor is used?
Exercise 4
For each of the following production functions, compute the MRTS (Marginal Rate
of Technical Substitution) and say if it exhibits increasing, constant or decreasing
returns to scale:
1. F (K, L) = K 2 L
2. F (K, L) = 10K + 5L
3. F (K, L) = 25L0.6 K 0.4

You might also like