Managerial Economics 8Th Edition Samuelson Test Bank Full Chapter PDF

Managerial Economics 8th Edition
Samuelson Solutions Manual

Full download at link:
Solution Manual: https://testbankpack.com/p/solution-manual-for-

managerial-economics-8th-edition-samuelson-marks-1118808940-
9781118808948/
Test Bank: https://testbankpack.com/p/test-bank-for-managerial-

economics-8th-edition-samuelson-marks-1118808940-
9781118808948/
CHAPTER 5: Production
MULTIPLE CHOICE
1. A firm’s production function shows:

a) the maximum level of output the firm can produce for any combination of inputs.
b) the least-cost combination of inputs that can be used to produce a given level of output.
c) the average cost associated with the production of various levels of output.
d) the profit-maximizing level of output that can be produced with a given level of inputs.
e) the marginal cost of producing an extra unit of output by employing an extra unit of an
input.
ANSWER: a
SECTION REFERENCE: Basic Production Concepts
LO: Explain the production function.
DIFFICULTY LEVEL: Medium
2. The short-run is best defined as the time period in which:

a) all inputs to production can be varied
b) the amount of output cannot be varied
c) one or more inputs to production are fixed
d) the marginal cost of production is low
e) all inputs to production remain fixed
ANSWER: c
SECTION REFERENCE: Production in the short run
5-1
Production
LO: Discuss how to find the optimal use of a single input in the short run.
DIFFICULTY LEVEL: Easy
3. Which of the following is true in the long-run?

a) A firm can vary all the inputs used in production.
b) A firm can vary only one of the inputs used in production.
c) All inputs used in production are fixed in the long-run.
d) The level of output produced can be varied only over a limited range.
e) The marginal cost is at a minimum.
ANSWER: a
The following table shows the total output produced in a factory at various levels of
employment of labor. The firm sells each unit of output at $2 and each worker is paid a
wage of $32.
Table 5-1
Number of
Total output
workers
1 8
2 18
3 30
4 41
5 50
6 56
7 60
8 61
9 62
4. Refer to Table 5-1. What is the marginal product of the 5th worker?
a) 9 units
b) 2 units
c) 8 units
d) 6 units
e) 11 units
ANSWER: a
5-2
Chapter 5
5. Refer to Table 5-1. Diminishing returns to labor occurs beyond:

a) 4 workers.
b) 3 workers.
c) 5 workers.
d) 9 workers.
e) 8 workers.
ANSWER: b
6. Which of the following correctly defines the marginal product of labor?

a) It is the additional output produced by an additional unit of labor, all other factors held
constant.
b) It is the additional output produced by a proportionate increase in capital and labor, the
demand for the product held constant.
c) It is the additional labor required to produce one additional unit of output, other inputs
held constant.
d) It is calculated as the total output divided by the total units of labor employed in
production.
e) It is the addition to total cost from employing an additional unit of labor.
ANSWER: a
7. The marginal product of labor initially rises as more labor is employed because of:
a) division and specialization of labor.
b) constant returns to scale.
c) total factor productivity.
d) an increase in profits from the additional output produced.
e) a fall in the cost of hiring additional labor.
ANSWER: a
8. What does the law of diminishing marginal returns state?
5-3
Production
a) When all inputs to production are increased in equal proportions, output will eventually
decrease.
b) When one input is increased, with all other inputs unchanged, the marginal product of the
input will eventually decline.
c) When one input is held constant, and all other inputs are increased, output will eventually
decrease.
d) When one input is increased, and all other inputs are held constant, output will increase at
an increasing rate.
e) When all inputs to production are increased in equal proportions, the addition to output
will increase at an increasing rate.
ANSWER: b
9. When the marginal product of a variable input is zero, it implies that the firm is at the point
where the total product is:
a) increasing at an increasing rate.
b) also equal to zero.
c) at its maximum.
d) decreasing at an increasing rate.
e) increasing at a decreasing rate.
ANSWER: c
10. The marginal revenue product of labor is equal to the product of:
a) the marginal product of labor and the quantity of labor employed.
b) the wage rate and the marginal product of labor.
c) the wage rate and marginal revenue per unit of output
d) marginal product of labor and total revenue of the firm.
e) the marginal revenue per unit of output and the marginal product of labor
ANSWER: e
5-4
Chapter 5
The following table shows the total output per hour produced in a factory at various levels of
employment of labor. The firm sells each unit of output at $2 and each worker is paid a
wage of $12.
Table 5-1
Number of Total output
workers
1 8
2 18
3 30
4 41
5 50
6 55
7 59
8 61
9 62
11. Refer to Table 5-1. What is the total revenue that accrues to the firm when it employs 4
workers?
a) $36
b) $112
c) $100
d) $60
e) $82
ANSWER: e
12. Refer to Table 5-1. Diminishing returns occurs beyond:

a) 2 workers.
b) 3 workers.
c) 4 workers.
d) 5 workers.
e) 6 workers.
ANSWER: b
13. Refer to Table 5-1. What is the marginal revenue product of the 4th worker?
a) $82
b) $20.50
5-5
Production
c) $22
d) $18
e) None of these answers is correct.
ANSWER: d
14. Refer to Table 5-1. What is the marginal revenue product of the 2nd worker?
a) $36
b) $24
c) $22
d) $20
e) 0
ANSWER: d
15. Refer to Table 5-1. What is the marginal profit of the 2nd worker?
a) $24
b) $20
c) $12
d) $8
e) $0
ANSWER: d
DIFFICULTY LEVEL: Hard
16. Refer to Table 5-1. How many workers should the firm employ in order to maximize profit?
a) 7
b) 6
c) 5
d) 4
e) 3
ANSWER: c
5-6
Chapter 5
17. A profit-maximizing firm will hire the variable input, labor, until the point where:
a) marginal product of labor is equal to the marginal revenue product of capital.
b) marginal revenue from each unit of output is equal to the wage rate.
c) marginal revenue product of labor is equal to the marginal cost of labor.
d) marginal revenue product of labor is equal to zero.
e) marginal product of labor equals the marginal revenue from each unit of output.
ANSWER: c
18. Firm X sells output at a price of $8 per unit and pays labor a wage of $20 per hour. The
marginal product of labor is given by: MPL = 12 – .1L. To maximize profit, the firm should
utilize _____ hours of labor.
a) 75
b) 80
c) 85
d) 90
e) 95
ANSWER: e
19. When a firm faces constant returns to scale, a proportionate increase in all inputs:
a) will keep output constant.
b) will increase output by the same proportion as the increase in inputs.
c) will lead to a decline in the cost of production.
c) will result in a higher-than-proportionate increase in output.
e) will not change the total costs of production.
ANSWER: b
SECTION REFERENCE: Production in the Long Run
LO: Discuss how to choose the best mix of inputs in the long run.
5-7
Production
20. Which of the following is true of a firm that faces increasing returns to scale?
a) An increase in the quantity of one input will increase output by a greater proportion.
b) As the quantity of all inputs are increased, the average cost of production will increase.
c) A given increase in the quantity of all inputs will increase output by a greater proportion.
d) As the quantity of one input is increased, its marginal product will increase at an
increasing rate.
e) As the quantity of one input is increased, the marginal cost of production will decline.
ANSWER: c
21. Output elasticity is the percentage change in output that results from a 1 percent increase
_____.
a) in all the inputs
b) in the price of an input
c) in the price of the final product
d) in the marginal revenue product of a variable input
e) in the marginal product of an input
ANSWER: a
22. If there is a change in input prices, what is the most likely impact on production isoquants?
a) They will shift leftward toward the origin.
b) The curvature of the isoquant will change.
c) They will remain unchanged.
d) They will shift outward away from the origin.
e) Uncertain, depends on which input prices change.
ANSWER: c
23. Which of the following correctly describes a production isoquant?

a) An isoquant is a curve that shows all possible combinations of inputs that can produce a
given level of output.
5-8
Chapter 5
b) An isoquant is a curve that shows the least-cost combinations of inputs that can produce a
given level of output.
c) An isoquant is a curve that shows all possible combinations of inputs that are used to
produce various levels of output.
d) An isoquant is a curve that shows all possible levels of output that can be produced in the
short-run using one variable input.
e) An isoquant is a curve that shows all possible levels of output that can be produced at
various input price levels.
ANSWER: a
24. The slope of an isocost line shows:

a) the ratio of the marginal revenue product of the inputs.
b) the ratio of marginal product of the inputs.
c) the marginal rate of technical substitution.
d) the ratio of the input prices.
e) the output elasticity of production.
ANSWER: d
25. Which of the following identifies the optimal usage of inputs by a profit-maximizing firm?
a) Marginal product of labor = marginal product of capital = 0
b) Marginal product of labor/price of labor = marginal product of capital/price of capital
c) Marginal revenue product of labor = marginal revenue product of capital
d) Marginal cost of labor = marginal cost of capital
e) Marginal product of labor/marginal product of capital = price of capital/price of labor
ANSWER: b
26. If a production function is expressed in a linear form, the inputs used in the production
process:
a) are perfect complements.
b) are perfect substitutes.
5-9
Production
c) have to be increased in the same proportion.

d) have fixed marginal costs.
e) have equal marginal productivity.
ANSWER: b
SECTION REFERENCE: Measuring Production Functions
LO: Understand how to estimate and measure various types of production functions.
27. Which of the following is true of fixed-proportions production?

a) The inputs used in production have constant marginal products.
b) An increase in the price of an input will lead the firm to substitute away from it.
c) The inputs used in production display diminishing marginal returns.
d) The inputs used in production are perfect complements.
e) The marginal cost of the inputs used in production is fixed.
ANSWER: d
28. Which of the following production functions displays decreasing returns to scale?
a) Q = aL + bK2
b) Q = aL + bK
c) Q = bLK
d) Q = cL.2K.5
e) Q = cL2K5
ANSWER: d
29. If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2, the
production function exhibits:
a) increasing returns to scale.
b) constant returns to scale.
c) diminishing marginal returns.
d) declining productivity.
e) increasing average costs.
ANSWER: a
5-10
Chapter 5

30. When a profit-maximizing firm undertakes production in more than one plant, it will
allocate a fixed level of inputs such that _____ is equal across plants.
a) the total product
b) the marginal cost of production
c) the marginal product
d) the average product
e) Answers the marginal product and the average product are both correct.
ANSWER: c
SECTION REFERENCE: Other Production Decisions
LO: Describe additional production decisions involving the allocation of inputs.
31. A factory produces product A according to the production function QA = 100XA, where XA
denotes the amount of input and QA is the quantity produced. It also produces product B
according to the production function QB = 200XB - XB2, where XB denotes the amount of
input and QB is the quantity produced. The total available amount of input X is 100 units.
The firm’s profit-maximizing allocation of input X is:
a) XA = 60 and XB = 40.
b) XA = 50 and XB = 50.
c) XA = 0 and XB = 100.
d) XA = 100 and XB = 0.
e) XA = 30 and XB = 70.
ANSWER: b
SECTION REFERENCE: Other Production Decisions
LO: Describe additional production decisions involving the allocation of inputs.
SHORT ANSWERS
32. Carefully define the term production function, and explain its importance.
ANSWER: A firm's production function is a quantitative relationship that indicates the

maximum level of output the firm can produce for any combination of inputs. A production
function is a guide to management for efficient production of a good or service, efficiency
implying the production of a given level of output at the lowest possible cost using the
available technology.
5-11
Production
SECTION REFERENCE: Basic Production Concepts

LO: Explain the production function.
33. Suppose that management increases the size of its plant. What is the most likely impact on
total and marginal products of the other inputs? How will this affect usage of the variable
inputs?
ANSWER: The most likely impact is an increase in total product and marginal product for a
given amount of labor. Graphically, the total product and marginal product curves would
shift upward, and the peaks of the curves would occur at greater input levels than originally.
Typically, this will result in increased usage of the variable input.
34. Carefully explain why the marginal product of labor first rises and then falls as the use of
labor increases. In which portion of the marginal product of labor curve will the firm
typically produce?
ANSWER: The marginal product of labor increases because increase in labor employment
allows for specialization of labor. In addition, any underutilized fixed factor can be used
more intensively. Marginal product of labor then decreases as opportunities for
specialization are exhausted, and more and more labor is applied to a fixed amount of
machines and production capacity. The typical firm will produce at an input level for which
the marginal product of labor is falling.
SECTION REFERENCE: Production in the Short Run
35. Will a profit-maximizing firm seek to maximize output from a variable input? Explain.
ANSWER: No. Assume the variable input is labor. A firm will maximize profit when it
equates the marginal revenue product of labor (MRPL) and the marginal cost of labor (MCL).
If the firm maximizes output from an input, then MPL = 0, and MRPL = 0. Because MCL is
positive (i.e., there is a cost of hiring additional labor hours), the firm will not maximize
profit in this case. Instead the firm will maximize profit by using less labor, so that MPL is
still positive.
5-12
Chapter 5
36. Explain how the optimal usage of the variable input, labor, will change in response to the
following changes in the short-run:
(a) A drop in the price of the good or service that the firm sells
ANSWER: The firm’s optimal use of its variable input (here, labor) is governed by the rule:
MRPL = MCL. The key is to trace the effect of each change on the factors entering into this
rule. A drop in the good’s price reduces the firm’s marginal revenue product causing it to
use less labor and to lower its output level.
(b) A drop in the hourly wage
ANSWER: A drop in the hourly wage makes the use of labor more attractive as the marginal
cost of labor declines. Labor use and output both increase.
(c) A decline in the productive efficiency of labor
ANSWER: A decline in labor’s marginal product causes MRPL to fall, so labor usage and
output both decrease.
37. Dirt Diggers (DD) is a firm that excavates roadside ditches to lay drainpipe. Its output
follows the production function: Q = 10L – .1L2, where Q denotes the length of the ditch in
meters. The firm hires labor at a wage of $12 per hour. DD has received an offer to excavate
250 meters for a price of $500. Should it accept the offer? Suppose DD is offered as much or
as little excavation work as it desires at a price of $2.00 per meter, what is the optimal
quantity that it should choose to excavate?
ANSWER: From the production function, it can be seen that excavating 250 meters requires
50 labor hours. For this much labor, the total wage cost is ($12)(50) = $600. Clearly, DD
should reject the $500 price.
To determine a profit-maximizing quantity (of digging), DD should set MRPL =
(MR)(MPL) = MCL. We know that MPL = dQ/dL = 10 – .2L. Thus, we have: ($2)(10 – .2L)
= $12, implying L = 20 labor hours. In turn, Q = 200 – 40 = 160 meters, and DD's profit is
($2)(160) – ($12)(20) = $320 – $240 = $80.
5-13
Production
38. Carefully define returns to scale, and explain how this differs from marginal returns.
ANSWER: Returns to scale refer to the impact on output if all inputs are changed in the
same proportion. For example, if a firm faces constant returns to scale and all inputs increase
by 5%, then output will increase by 5%. Marginal returns refer to the impact on output if one
input is changed while all other inputs are held fixed. Typically, it is expected that as use of
the input increases, the firm will experience diminishing marginal returns. This will be true
regardless of returns to scale. Marginal returns to an input applies to the short-run and
returns to scale applies in the long-run as all inputs can be varied simultaneously only in the
long-run.
39. Carefully define marginal rate of technical substitution. What are the assumptions on the
basis of which it is calculated?
ANSWER: The marginal rate of technical substitution, MRTS, denotes the rate at which one
input substitutes for another in production. When using isoquants, it can be measured as:
(–MPL/MPK), where MPL and MPK refer to the marginal products of labor and capital
respectively. While calculating MRTS, it is assumed that Q or output is constant; that is,
inputs are substituted along the same isoquant.
40. For the Cobb-Douglass production function: Q = cLαKβ derive the marginal rate of technical
substitution?
ANSWER: The marginal rate of technical substitution [MRTS] is the ratio of the marginal
product of labor [MPL] to the marginal product of capital [MPK]. MPL = ∂Q/∂L = cαLα-1Kβ
and MPK = cβLαKβ-1. Therefore, MRTS = MPL/ MPK = (α/β)(K/L).
5-14
Chapter 5
41. Carefully explain the condition that the firm should follow if it wishes to produce at least
cost in the long run.
ANSWER: In the long run, the firm produces at least cost when the ratios of marginal
products to input costs are equal across all inputs. This requires that the firm hire inputs so
that: MPK/PK = MPL/PL = ... = MPi/Pi for all inputs. If a firm follows this rule, then the extra
output per dollar of input will be the same for all inputs. No possible rearrangement of
inputs will decrease cost for that level of output, or increase output for that level of
expenditure on inputs.
42. Specialty Steel has carefully measured production in its new plant to determine whether it is
technically efficient in production. It has found that, for its two inputs K and L, it has the
following marginal products: MPK = 15 units and MPL = 22 units. The inputs are hired in
perfectly competitive markets, and the firm faces input costs of PK = $7.50 and PL = $10 per
unit. You have been hired as a consultant to assist Specialty in increasing profitability. What
do you recommend about production planning? Explain.
ANSWER: In the long run, the firm produces at least cost when the ratios of marginal
products to input costs are equal across all inputs. This requires that MPK/PK = MPL/PL.
Here, the respective ratios are 15/7.50 and 22/10 and are not equal. Therefore, the firm is not
maximizing profit. It can increase efficiency and profit by hiring more labor and/or less
capital to bring this ratio into equality. As more L is used, MPL will decline; as less K is
used, MPK will increase.
43. A firm has carefully estimated its production function to be: Q = K.55L.45. What is output
elasticity in this case? What sort of returns to scale does the firm face? Explain.
ANSWER: Output elasticity is given by the sum of the exponents 0.55 + 0.45 = 1. In
addition, because the exponents add up to one, the firm faces constant returns to scale.
ESSAYS
5-15
Another random document with
no related content on Scribd:
The Project Gutenberg Literary Archive Foundation is a non-profit
501(c)(3) educational corporation organized under the laws of the
state of Mississippi and granted tax exempt status by the Internal
Revenue Service. The Foundation’s EIN or federal tax identification
number is 64-6221541. Contributions to the Project Gutenberg
Literary Archive Foundation are tax deductible to the full extent
permitted by U.S. federal laws and your state’s laws.
The Foundation’s business office is located at 809 North 1500 West,

Salt Lake City, UT 84116, (801) 596-1887. Email contact links and up
to date contact information can be found at the Foundation’s website
and official page at www.gutenberg.org/contact
Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission of
increasing the number of public domain and licensed works that can
be freely distributed in machine-readable form accessible by the
widest array of equipment including outdated equipment. Many small
donations ($1 to $5,000) are particularly important to maintaining tax
exempt status with the IRS.
The Foundation is committed to complying with the laws regulating

charities and charitable donations in all 50 states of the United
States. Compliance requirements are not uniform and it takes a
considerable effort, much paperwork and many fees to meet and
keep up with these requirements. We do not solicit donations in
locations where we have not received written confirmation of
compliance. To SEND DONATIONS or determine the status of
compliance for any particular state visit www.gutenberg.org/donate.
While we cannot and do not solicit contributions from states where

we have not met the solicitation requirements, we know of no
prohibition against accepting unsolicited donations from donors in
such states who approach us with offers to donate.
International donations are gratefully accepted, but we cannot make

any statements concerning tax treatment of donations received from
outside the United States. U.S. laws alone swamp our small staff.
Please check the Project Gutenberg web pages for current donation
methods and addresses. Donations are accepted in a number of
other ways including checks, online payments and credit card
donations. To donate, please visit: www.gutenberg.org/donate.
Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could be
freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose network of
volunteer support.
Project Gutenberg™ eBooks are often created from several printed

editions, all of which are confirmed as not protected by copyright in
the U.S. unless a copyright notice is included. Thus, we do not
necessarily keep eBooks in compliance with any particular paper
edition.
Most people start at our website which has the main PG search
facility: www.gutenberg.org.
This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg Literary
Archive Foundation, how to help produce our new eBooks, and how
to subscribe to our email newsletter to hear about new eBooks.

Managerial Economics 8Th Edition Samuelson Test Bank Full Chapter PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Managerial Economics 8Th Edition Samuelson Test Bank Full Chapter PDF

Uploaded by

Copyright:

Available Formats

Managerial Economics 8th Edition

Samuelson Solutions Manual

Solution Manual: https://testbankpack.com/p/solution-manual-for-

Test Bank: https://testbankpack.com/p/test-bank-for-managerial-

1. A firm’s production function shows:

2. The short-run is best defined as the time period in which:

3. Which of the following is true in the long-run?

5. Refer to Table 5-1. Diminishing returns to labor occurs beyond:

6. Which of the following correctly defines the marginal product of labor?

8. What does the law of diminishing marginal returns state?

12. Refer to Table 5-1. Diminishing returns occurs beyond:

23. Which of the following correctly describes a production isoquant?

24. The slope of an isocost line shows:

c) have to be increased in the same proportion.

27. Which of the following is true of fixed-proportions production?

SECTION REFERENCE: Measuring Production Functions

ANSWER: A firm's production function is a quantitative relationship that indicates the

SECTION REFERENCE: Basic Production Concepts

DIFFICULTY LEVEL: Medium

(b) A drop in the hourly wage

(c) A decline in the productive efficiency of labor

The Foundation’s business office is located at 809 North 1500 West,

Section 4. Information about Donations to

The Foundation is committed to complying with the laws regulating

While we cannot and do not solicit contributions from states where

International donations are gratefully accepted, but we cannot make

Section 5. General Information About Project

Project Gutenberg™ eBooks are often created from several printed

This website includes information about Project Gutenberg™,

You might also like