The law of diminishing marginal returns states that:

the marginal product of labor declines as all inputs are

increased
production functions exhibit decreasing returns to scale
the marginal product of labor returns as more capital is used
the marginal product of a factor eventually diminishes
as more of the input is used, holding
other inputs fixed

Suppose the production function is given by Q = min {K, L}.

How much output is produced when 4 units of labor and 9
units of capital are employed?
0

13

The marginal product of labor is defined by the:

change in output divided by the change in labor input
usage
change in labor input usage divided by the change in output
output divided by the labor input usage
labor input usage divided by the output level

The marginal rate of technical substitution is defined by:

MRTS1,2 = MP1 /MP2
MRTS1,2 = MP1MP2
MRTS1,2 = MP1/P1
MRTS1,2 = P1/P2

The production function for a competitive firm is Q =

K0.50 L0.50. The firm sells its output at a price of 10Php, and
can hire labor at a wage of 5Php. Capital is fixed at one unit
and costs 2Php. The maximum profits are:
 3.

10.

15.

None of the answers are correct.

Suppose the production function is given by Q = 3K + 4L.

What is the marginal product of capital when 5 units of
capital and 10 units of labor are employed?
3

11

45

The production function for a competitive firm is Q = K 0.50L0.50.

The firm sells its output at a price of 10Php, and can hire
labor at a wage of 5Php. Capital is fixed at 25 units. The
profit-maximizing quantity of labor is:
1.

2.

10.

No correct answer.

According to the table below, what is the average total cost

of producing 160 units of output?
 

Q FC VC

0 1,000 0
 20 1,000 350

50 1,000 700

90 1,000 1,050

125 1,000 1,400

145 1,000 1,750

160 1,000 2,100

12.98

16.31

22.04

19.38

Lines that represent bundles of inputs that cost the same

total amount are called:
total cost curves
isocost curves
cost curves

isoquants

According to the table below, what is the marginal cost of

producing 90 units of output?
 

Q FC VC

0 1,000 0
 20 1,000 350

50 1,000 700

90 1,000 1,050

125 1,000 1,400

145 1,000 1,750

160 1,000 2,100

 
5.32

 8.75

11.67

21.00

Given the Leontief production function Q = min{5.5K, 6.7L},

how much output is produced when K = 40 and L = 35?
220

234.5

192.5

268

The addition to total cost resulting from the addition of the

last unit of output is known as:
average product
average variable cost
average total cost
marginal cost
When total product is at its maximum:
average product is greater than marginal product
average product is maximized
average product equals marginal product
marginal product equals 1

For a cost function C = 100 + 10Q + Q2, the marginal cost of

producing 10 units of output is:
10.

200.

210.

No correct answer.

Isoquants usually slope downward (from left to right)

because:
marginal products are usually positive
marginal products are always positive
marginal products will eventually decrease
marginal products are always increasing

Given the following table, how many workers should be hired

to maximize profits?

Marginal
Labor Product Labor VMPL Wage

1 8 32Php 100Php

2 32 128Php 100Php

3 16 64Php 100Php

4 -1 -4Php 100Php

5 -12 -48Php 100Php

 1

If average variable cost is increasing with increases in

output, total fixed cost will:
increase with increases in output
decrease with increases in output
remain unchanged with increases in output
increase initially and then decrease with increases in output

Diminishing marginal returns:

imply decreasing returns to scale
occur at all combinations of input usage
occur only for labor
are consistent with increasing returns to scale

According to the table below, what is the total cost of producing

125 units of output?

Q FC VC

0 1,000 0

20 1,000 350

50 1,000 700

90 1,000 1,050
 125 1,000 1,400

145 1,000 1,750

160 1,000 2,100

1,000

2,050

1,400

2,400

If labor is on the vertical axis and capital is on the horizontal

axis, the slope of an isocost line
is given by:
−PL /PK
−PK /PL
−PKPL
−MPL /
MPK

The optimal combination of two inputs, K and L, can be

characterized by:
PKMPK = PLMPL
MPK = MPL
PLMPK = PKMPL
MPK /MPL = PL /PK

The marginal rate of technical substitution between two

inputs:
shows the rate at which one input can be traded for
another, holding output constant
shows the efficient combination of inputs
increases as we move down an isoquant
 shows the rate at which output can be increased by using more of both
inputs

The opportunity cost of a firm’s inputs:

depends on who supplies them to the firm
includes implicit costs but does not include explicit costs
includes explicit costs but does not include implicit cost
is the value of the inputs in their most highly valued alternative
use

According to the table below, at what level of output is

marginal cost minimized?
 

Q FC VC

0 1,000 0

20 1,000 350

50 1,000 700

90 1,000 1,050

125 1,000 1,400

145 1,000 1,750

160 1,000 2,100

90

50

125
 160

If there is only one variable input, average variable cost can

be defined as the:
output’s price divided by the input’s average product
output’s price divided by the input’s marginal product
price of the variable input divided by its average
product
price of the variable input divided by its marginal product

Suppose the cost function is C(Q) = 50 + Q − 10Q 2 + 2Q3.

What is the marginal cost of producing 10 units?
401Php

1,060Php

560Php

1,010Php

Suppose the production function is given by Q = 3K + 4L.

What is the average product of capital when 5 units of capital
and 10 units of labor are employed?
3

11

45

For a cost function C = 100 + 10Q + Q2, the average fixed

cost of producing 10 units of output is:
10.

5.
 1.

None of the answers are correct.

For the cost function C(Q) = 200 + 3Q + 8Q2 + 4Q3, what is

the average fixed cost of producing six units of output?
18.31

212.61

42.12

33.33

Long-run average cost equals long-run marginal cost

whenever:
the production function exhibits constant returns to
scale
fixed costs are zero
no factor always has increasing marginal returns
the cost of capital is near zero

Given the linear production function Q = 10K + 5L, if Q =

10,000 and K = 500, how much labor is utilized?
600 units

800 units

500 units

1,000 units

The marginal product of labor can be illustrated

geometrically as the:
slope of the total product curve with respect to labor
slope of the total product curve with respect to capital
slope of a chord from the origin out to the total product
 curve at the specified level of labor
inverse of the slope of a chord from the origin out to the
total product curve at the specified level of labor

When average total cost is at its minimum:

average variable cost plus average fixed cost is declining
with increases in output
average total cost is equal to average variable cost
marginal cost is equal to average variable cost
marginal cost is equal to average total cost

Suppose the cost function is C(Q) = 50 + Q − 10Q 2 + 2Q3. At

10 units of output, the average cost curve is:
in the increasing stage.

in the declining stage.

at the minimum level.

at the maximum level.

Suppose the production function is Q = min {K, 2L}. How

much output is produced when 4 units of labor and 9 units of
capital are employed?
 
2

For the cost function C(Q) = 100 + 2Q + 3Q2, the average

fixed cost of producing 2 units of output is:
100.
 50.

3.

2.

Given a cost function C(Q) = 200 + 14Q + 8Q2, what is the

marginal cost function?
14 + 16Q

14Q + 8Q2

200 + 8Q2

14 + 16Q2

A production function is a table, a graph, or an equation

showing the:
least-cost method of producing output
optimal combination of inputs
maximum output that can be achieved from specified
levels of inputs
combinations of inputs that can be produced with equal costs

According to the table below, what is the average variable

cost of producing 50 units of output?
 

Q FC VC

0 1,000 0

20 1,000 350

50 1,000 700
 90 1,000 1,050

125 1,000 1,400

145 1,000 1,750

160 1,000 2,100

21

34

14

20

Short-run marginal cost eventually increases with increasing

output because:
eventually marginal returns will diminish
not all variable inputs increase at the same rate
diseconomies of scale usually set in immediately
of diseconomies of scope

Suppose the cost function is C(Q) = 50 + Q − 10Q 2 + 2Q3.

What is the variable cost of producing 10 units?
401Php

1,060Php

560Php

1,010Php

For the cost function C(Q) = 100 + 2Q + 3Q2, the total

variable cost of producing 2 units of output is:
16.
 12.

4.

2.

Suppose the cost function is C(Q) = 50 + Q − 10Q 2 + 2Q3.

What are the fixed costs?
50Php

10Php

1Php

2Php

For the cost function C(Q) = 1000 + 14Q + 9Q2 + 3Q3, what
is the marginal cost of producing the fourth unit of output?
42Php

295Php

230Php

116Php

When average variable cost is at its minimum:

average total cost is increasing with increases in output
average variable cost plus average fixed cost is increasing
with increases in output
average total cost is equal to average variable cost
marginal cost is less than average total cost

The law of diminishing marginal returns is obvious because,

if it didn’t hold, it would be possible to:
 feed everyone in the world by intensively cultivating one
acre of land
manufacture all of the cars in the world using just one of
the world’s existing factories
increase total output of a product without employing
additional inputs
answers a and b, but not c

For a cost function C = 100 + 10Q + Q2, the average variable

cost of producing 20 units of output is:
10.

20.

30.

None of the answers are correct.

For the multiproduct cost function C(Q ,Q ) = 100 + 2Q1Q2 +

1 2

4Q 2, what is the marginal cost function for good one?

1

MC1 = 2Q2 + 4Q1 − Q22.

MC1 = 2Q2 + 8Q1. *

MC1 = 100 + 2Q1Q2 + 4Q12.

MC1 = 4Q12 − 2 Q22.

Suppose the production function is given by Q = 3K + 4L.

What is the marginal product of capital when 10 units of
capital and 10 units of labor are employed?
3

11

45
The average product of labor is defined as the:
change in output divided by the change in labor input
usage
change in labor input usage divided by the change in
output
output divided by the labor input usage
labor input usage divided by the output level

The production function Q = K0.50L0.50 is called:

Cobb Douglas. *

Leontief.

linear.

None of the answers are correct.

For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal

cost of producing 2 units of output is:
2.

3.

12.

14.

The weekly total cost of baking pies at Tasty Tortes is given

by TC = 0.01Q1.5. Tasty’s
marginal cost of producing 10,000 pies a week is:
1.00Php
1.50Php
2.00Php
2.50Php
An isoquant represents combinations of inputs that:
produce the same level of output
produce increasing amounts of output
minimize costs
maximize output

Suppose the cost function is C(Q) = 50 + Q − 10Q 2 + 2Q3.

What is the total cost of producing 10 units?
2,060Php

1,060Php

560Php

1,010Php

Suppose the production function is given by Q = min{K, L}.

How much output is produced when 10 units of labor and 9
units of capital are employed?
0

13

If Hilltop Turf Farm’s total cost of producing acres of sod is

TC = 0.2Q2 + 120Q + 5,000, the
marginal cost of producing the 50th acre of sod is:
110Php
120Php
130Php
140Php
Suppose the production function is given by Q = 3K + 4L.
What is the average product of capital when 10 units of
capital and 10 units of labor are employed?
3

45

If the production function is Q = K0.50L0.50 and capital is fixed

at 1 unit, then the average product of labor when L = 25 is:
2/5.

1/5.

10.

None of the answers are correct.

The production function for a competitive firm is Q =

K0.50 L0.50. The firm sells its output at a price of 10Php, and
can hire labor at a wage of 5Php. Capital is fixed at one unit.
The profit-maximizing quantity of labor is:
2/5.

1.

10.

None of the answers are correct.