Reference no: EM131684588

Question 1: Joe runs a farm. He rents the land for $240 a day, and he can hire workers for $10 per day for each worker. His short run production function is given in the first two columns of the following table.

Complete the table below by filling in ALL missing numbers. If your answer is a decimal rather than a whole number, round your answer to the nearest 2 decimal places. Also, do not enter leading zeroes.

For example, if the answer to a field is 1/8, enter .13

Do not enter .125 or 0.13 or 0.125

In addition, this will give you a completed table to view when answering the rest of the problems.

Workers	Output	MP	TVC	TFC	TC
0	0	----	0
1	10
2	40
3	80
4	105
5	115
6	120

Question 2

Joe runs a farm. He rents the land for $240 a day, and he can hire workers for $10 per day for each worker. His short run production function is given in the first two columns of the following table.

Complete the table below by filling in ALL missing numbers. If your answer is a decimal rather than a whole number, round your answer to the nearest 2 decimal places. Also, do not enter leading zeroes.

For example, if the answer to a field is 1/8, enter .13
Do not enter .125 or 0.13 or 0.125

Helpful advice: This question is the second half of a larger table. The rest of the table is in Question 1. You are strongly encouraged to download the complete table in a Word doc and solve it all at once. Then, type the numbers into the appropriate fields below and in Question 1. In addition, this will give you a completed table to view when answering the rest of the problems.

Workers	Output	AFC	AVC	ATC	MC
0	0	----	----	----	----
1	10
2	40
3	80
4	105
5	115
6	120

Question 3

In the table you just filled out, find where diminishing marginal productivity begins. Specifically, which is the first worker to add less marginal output than the previous worker?

first worker
second worker
third worker
fourth worker
fifth worker
sixth worker

Question 4
According to the table (and general theory), what is true?
the highest MP is associated with the highest MC
the highest MP is associated with the lowest MC
the lowest MP is associated with the lowest MC
the lowest MC is associated with the lowest ATC

Question 5

For the following 6 questions, refer to the table you filled out above. Plot the labor input (workers) against the output. Put the labor input on the horizontal axis and the output on the vertical axis. What is the general shape of this function?
an upward sloping line
an upward sloping function that gets steeper as a lot of workers are hired
an upward sloping function that gets shallower as a lot of workers are hired
a symmetrical parabola
a downward sloping line

Question 6

Plot the labor input (workers) against the MP (marginal product). Put the labor input on the horizontal axis and the MP on the vertical axis. What is the general shape of this function?
It is a hill-shaped function (goes up, peaks, then falls)
It is a valley-shaped function (goes down, bottoms out, then rises)
It is a horizontal line
It is an upward sloping function
It is a downward sloping function

Question 7
Plot the output against the TVC (total variable cost). Put the output on the horizontal axis and the TVC on the vertical axis. What is the general shape of this function?
It is a hill-shaped function (goes up, peaks, then falls)
It is a valley-shaped function (goes down, bottoms out, then rises)
It is a horizontal line
It is an upward sloping function
It is a downward sloping function

Question 8
Plot the output against the TC (total cost). Put the output on the horizontal axis and the TC on the vertical axis. What is the general shape of this function?
It is a hill-shaped function (goes up, peaks, then falls)
It is a valley-shaped function (goes down, bottoms out, then rises)
It is a horizontal line
It is an upward sloping function
It is a downward sloping function

Question 9
Plot the output against the TFC (total fixed cost). Put the output on the horizontal axis and the TFC on the vertical axis. What is the general shape of this function?
It is a hill-shaped function (goes up, peaks, then falls)
It is a valley-shaped function (goes down, bottoms out, then rises)
It is a horizontal line
It is an upward sloping function
It is a downward sloping function

Question 10
Plot the output against the AFC (average fixed cost). Put the output on the horizontal axis and the AFC on the vertical axis. What is the general shape of this function?
It is a hill-shaped function (goes up, peaks, then falls)
It is a valley-shaped function (goes down, bottoms out, then rises)
It is a horizontal line
It is an upward sloping function
It is a downward sloping function

Question 11
Think about the general relationship between the marginal product of labor (MPL) and the marginal cost of output (MC). As MPL increases, what happens to MC?
MC increases
MC decreases
MC remains the same
Any of the above answers could be correct, depending on the industry

Question 12
Think about the general relationship between the marginal product of labor (MPL) and the marginal cost of output (MC). As MPL decreases, what happens to MC?
MC increases
MC decreases
MC remains the same
Any of the above answers could be correct, depending on the industry

Question 13
If the margin is greater than the average, what can we say about the average and margin?
The average is at its maximum
The average is at its minimum
The average is rising
The average is falling
The margin is at its maximum
The margin is at its minimum
The margin is rising
The margin is falling

Question 14
What is the general relationship between AVC, ATC, and MC?
the three functions are all valley-shaped, but don't intersect each other
the three functions are all hill-shaped, but don't intersect each other
the thee functions are all valley-shaped, and AVC = ATC at most output levels
the three functions are all valley-shaped, and MC intersects each of the average functions at their minimum.
the three functions are all valley-shaped, and there is a single intersection point where MC = AVC = ATC.
the three functions are all valley-shaped, and ATC < AVC for most levels of output
answers [E] and [F} are both correct

Question 15
Diminishing marginal returns to labor
Will happen immediately at the first worker
Occur only in the long run
Are a result of variable capital inputs
Are the cause of decreasing returns to scale
All of the above
None of the above

Question 16
In the long run, what is true about increasing returns to scale? Increasing returns to scale means that doubling our inputs will result in _________ the output, and the long run average cost curve is ___________.
less than doubling, downward sloping
less than doubling, horizontal
less than doubling, upward sloping
doubling, downward sloping
doubling, horizontal
doubling, upward sloping
more than doubling, downward sloping
more than doubling, horizontal
more than doubling, upward sloping

Question 17
In the long run, what is true about constant returns to scale? Constant returns to scale means that doubling our inputs will result in _________ the output, and the long run average cost curve is ___________.
less than doubling, downward sloping
less than doubling, horizontal
less than doubling, upward sloping
doubling, downward sloping
doubling, horizontal
doubling, upward sloping
more than doubling, downward sloping
more than doubling, horizontal
more than doubling, upward sloping

Question 18
What is considered to be a cause of decreasing returns to scale (also called diseconomies of scale)?
high levels of technology
bureaucratic inefficiencies
workers organizing and forming unions
bulk discounts from the firm buying large amounts of inputs
workers slacking off with less supervision

Question 19
What is an intuitive explanation for increasing returns to scale (also called economies of scale)?
Bigger firms with larger amounts of capital can produce the goods at a lower cost
Bigger firms with larger amounts of capital produce the goods at a higher cost
Bigger firms pay workers higher wages
Firms will always attempt to secure the largest amount of capital
Larger firms always have fewer overhead costs

Question 20
Suppose there is an increased demand for output. How will this affect the demand curve for labor?
The labor demand will shift to the right
The labor demand will shift to the left
Firms will try to avoid using any labor (if possible) in their production process
Firms will try to use as much labor as possible in their production process

Question 21
Suppose that capital and labor are complements in production. Assume there is an increase in the quantity of capital. How will this affect the demand curve for labor?
The labor demand will shift to the right
The labor demand will shift to the left
Firms will try to avoid using any labor (if possible) in their production process
Firms will try to use as much labor as possible in their production process

Question 22
Suppose that capital and labor are complements in production. Assume there is a decrease in the quantity of capital. How will this affect the demand curve for labor?
The labor demand will shift to the right
The labor demand will shift to the left
Firms will try to avoid using any labor (if possible) in their production process
Firms will try to use as much labor as possible in their production process

Question 23
The Marginal Revenue Product of Labor (MRPL) curve is equivalent to:
The labor supply curve
The wage rate
The labor demand curve
The number of workers employed by the firm

Question 24
A profit-maximizing firm will continue to hire labor inputs as long as
it can pay the workers a low wage
the workers are very productive
the demand for labor is low
the demand for the output produced is high
the marginal revenue product is greater than the wage rate

Question 25
Suppose that capital and labor are substitutes in production. In other words, the firm can generally use capital or labor to get the production completed. Suppose the cost of capital increases greatly. How will this affect the demand for labor?
The labor demand will shift to the right
The labor demand will shift to the left
Firms will try to avoid using any labor (if possible) in their production process
Firms will try to use as much labor as possible in their production process

Question 26
Billy is an employee at BigCo. Suppose that at a wage rate of w = $10 per hour, Billy worked 40 hours per week. After Billy gets a raise to a new wage of w = $12, he decides to work 45 hours per week. What can we infer about Billy from this information?
His labor demand curve is downward sloping
His labor supply curve is downward sloping
Billy really enjoys going to work every day
Billy's substitution effect is greater than the income effect
Billy is working extra hours in hopes of getting an even higher wage raise
Billy has a perfectly inelastic supply of labor

Question 27
LeatherTown sells wallets for a price of $50 each. The firm pays its workers $100 per day. How many workers should LeatherTown hire?
5000 workers
5 workers
2 workers
1 part-time worker
not enough information to answer this question

Question 28
In this problem, the short run production function is given. In other words, we are able to see the total output that is produced when different amounts of labor inputs are hired. Each output unit produced by this firm is sold at a price of P = $4.
Fill out the rest of the table from the given information. Recall that MP = Marginal Product, MRP = Marginal Revenue Product, and TR = Total Revenue.
DO NOT ENTER DOLLAR SIGNS, ONLY ENTER NUMBERS

Labor	Output	MP	MRP	TR
0	0	0	0	0
1	80
2	140
3	185
4	220
5	250
6	260

Question 29
Having filled out the above table, we now consider the number of workers that will be hired by the profit-maximizing firm. In the table below, fill in Quantity of Labor demanded column. In other words, we are asking the following: How many workers will the firm hire at each wage rate?

Wage	Quantity of labor demanded
50
130
150
200
250
300
350