Chapter 6 T/F Questions for Understanding

1. True or False: The production function describes the relationship between inputs and outputs in
a firm's production process.

2. True or False: Diminishing marginal returns imply that as more of an input is added, the
additional output gained from each additional input decreases.

3. True or False: Technically efficient points in a production function always produce more output
than technically inefficient points.

4. True or False: The labor requirements function represents how much labor is required to
produce a given level of output.

5. True or False: Isoquants show the various input combinations that yield different levels of
output.

6. True or False: The Marginal Rate of Technical Substitution (MRTS) measures the trade-off
between inputs while keeping output constant.

7. True or False: Elasticity of substitution (σ) quantifies the ease with which a firm can substitute
labor for capital in the production process.

8. True or False: Increasing returns to scale occur when a proportional increase in all inputs results
in a greater than proportional increase in output.

9. True or False: Capital-saving technological progress reduces the marginal product of labor
relative to capital.

10. True or False: Neutral technological progress reduces both labor and capital inputs while keeping
the MRTS constant.