Chapter 6 MC Questions for Understanding

1. What does the production function represent in economics? a. The relationship between input
and output in a firm's production process. b. The cost of inputs required to produce a unit of
output. c. The pricing strategy for a firm's products. d. The relationship between capital and
labor in an economy.

2. Which of the following is NOT a component of the production function? a. Output (Q) b.
Technology c. Labor (L) d. Profit margin

3. What is the primary concept behind diminishing marginal returns in production functions? a. As
inputs increase, output increases at an increasing rate. b. As inputs increase, output remains
constant. c. As inputs increase, the additional output gained from each additional input
decreases. d. As inputs increase, output decreases.

4. Technically efficient points in a production function are those that: a. Maximize output given
input levels. b. Produce more output than is possible for a given set of inputs. c. Operate at a
constant level of output. d. Exhibit increasing returns to scale.

5. Which of the following functions represents the relationship between labor and output in a
production process? a. Total Product Function b. Marginal Product Function c. Labor
Requirements Function d. Isoquant Function

6. Isoquants represent: a. The relationship between total cost and output. b. All possible
combinations of inputs that yield the same level of output. c. The elasticity of substitution
between inputs. d. The relationship between input and output in a perfectly competitive market.

7. The Marginal Rate of Technical Substitution (MRTS) measures: a. The change in output due to a
change in technology. b. The trade-off between two inputs while keeping output constant. c. The
elasticity of substitution between inputs. d. The rate of technological progress.

8. Elasticity of substitution (σ) quantifies: a. The ease with which a firm can substitute inputs in the
production process. b. The cost of inputs in the production process. c. The relationship between
output and input in a perfectly competitive market. d. The relationship between technology and
output.

9. Which of the following represents increasing returns to scale? a. A 10% increase in inputs leads
to a 5% increase in output. b. A 10% increase in inputs leads to a 10% increase in output. c. A
10% increase in inputs leads to a 15% increase in output. d. A 10% increase in inputs leads to a
20% decrease in output.

10. What type of technological progress results in a reduction in both labor and capital inputs while
keeping the MRTS constant? a. Labor-saving technological progress b. Capital-saving
technological progress c. Neutral technological progress d. Increasing returns to scale