Microeconomics

Sunway College

CHAPTER 5 PRODUCTION

1. The short-run is a period:

A. That is long enough to permit changes in the firm’s plant size

B. In which a firm uses at least one fixed input
C. In which production occurs within one year
D. In which product occurs within six months

2. Marginal product is the measures the change in:

A. Total cost brought about by changing production by one unit

B. Product price brought about by changing production by one unit
C. The firm’s output is brought about by employing one additional unit of input
D. None of the above

3. The law of diminishing marginal returns implies that in the short run:

A. Output must fall beyond a certain point

B. The price must fall beyond a certain point
C. Total cost must fall beyond a certain point
D. The marginal product of the variable input must eventually decrease

4. When a total output curve is falling, its corresponding marginal product curve is:

A. Horizontal
B. Vertical
C. Falling
D. Rising

5. If a firm’s use of labour obeys the law of diminishing returns, then:

A. Doubling the number of workers causes the firm’s output also to double
B. Hiring additional workers to add less and less additional output
 C. It does not have enough time to hire or fire workers
D. Its marginal cost must be falling

6. The long run is a period:

A. That is long enough to permit changes in all firm’s inputs, both fixed and variable
B. That is too short to change the size of a firm’s plant
C. In which production occurs beyond one year
D. In which production occurs beyond five years

7. For the law of diminishing returns to be present, we must have:

A. At least one factor of production to be fixed

B. Output decreases as more labourers are hired
C. Double the output when labour input is doubled
D. The price of labour increases as more workers are hired

8. The law of diminishing returns applies to which of the following segments of the marginal
product of the labour curve?

A. The entire curve

B. The upward-sloping segment
C. The downward sloping segment
D. None of the above

9. It is impossible for Total product to be _________when marginal product is ___________.

A. Positive, negative
B. Decreasing, positive
C. Increasing, increasing
D. Increasing, decreasing

10. Production function shows the relationship between _____________.

A. Cost and input
B. Cost and output
C. Input and output
D. Wages and profit