BK013 Principles of Economics 1

Tutorial 5 – Semester 1 – 2019

Multiple Choice Questions

1. The function which shows the relationship between inputs and outputs is called the
___________________.
A. supply function
B. demand function
C. cost function
D. production function

2. The short run is a period of time __________________.

A. long enough for a firm to change its fixed inputs
B. of insufficient length for a firm to vary its output
C. in which at least one input is fixed in quantity
D. in which all factors of production may be varied

3. When Marginal Product is above Average Product, Average Product is ____________.

A. decreasing
B. increasing
C. negative
D. zero

4. Production function shows the relationship between ______________.

A. cost and input
B. wages and profit
C. cost and output
D. input and output

5. Average Product equals Marginal Product, when Average Product is ______________.

A. decreasing
B. increasing
C. negative
D. at its maximum

6. The main difference between “the short run” and “the long-run” is that ___________.
A. the Law of Diminishing Returns applies in the long, but not in the short run
B. in the long run all the resources are variable, while in the short run at least one
resource is fixed
C. fixed cost are more important to decision making in the long run than they are in the
short run
D. in the short run all the resources are fixed, while in the long run all resources are
variable

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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

7. When the output increases in the same proportion as the input, the returns to scale
______________________.
A. remain constant
B. will increase
C. will decrease
D. will be negative

8. When the Total Product declines, the Marginal Product is ___________________.

A. zero
B. positive
C. negative
D. at its maximum

9. When the Average Product curve is rising, _______________________.

A. the Marginal Product curve lies above the Average Product curve
B. the Marginal Product curve lies below the Average Product curve
C. the Marginal Product curve cuts the Average Product curve
D. None of the above.

10. The Marginal Product curve and the Average Product curve intersect _____________.
A. at the maximum point of the Marginal Product curve
B. where the Total Product is at its maximum
C. where the Marginal Product equals zero
D. at the maximum point of the Average Product curve

11. The change in output when another unit of a variable factor is employed is reffered as
______________________.
A. Average Product
B. Variable Product
C. Marginal Product
D. Total Product

12. Which of the following is NOT correct?

A. The Marginal Product is greater than the Average Product, when the Average
Product is rising.
B. The Total Product is at its maximum, when the Average Product is also at its
maximum.
C. The Marginal Product intersects with the average, when the Average Product is at
its maximum.
D. The Total Product is at its maximum, when the Marginal Product is zero.

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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

Questions 13 until 15 refer to the following table.

Number of workers Total Product Marginal Product

0 0 -
1 3 3
2 5
3 12
4 15
5 1

13. When two workers are employed, the ______________________.

A. Total Product is 4
B. Average Product is 4
C. Average Product is 10
D. Total Product is 20

14. The Marginal Product of the forth worker is ______________________________.

A. 5 units of output
B. 3 units of output
C. 3.8 units of output
D. 3.2 units of output

15. The Average Product of the fifth worker is ____________________.

A. 16 units of output
B. 17 units of output
C. 3.8 units of output
D. 3.2 units of output

16. At what point in the graph shown below does the law of diminishing returns set in?
Product

AP
Input
A B C D
MP
A. At point A.
B. At point B.
C. At point C.
D. At point D.
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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

Questions 17 until 19 refer to the following table.

Number of workers Units of output

0 0
1 40
2 90
3 126
4 150
5 165
6 180

17. Assume that amount of all non-labour resources is fixed. Diminishing returns become
evident with the addition of ___________________.
A. the sixth worker
B. the fourth worker
C. the third worker
D. the second worker

18. The Marginal Product of the sixth worker is __________________.

A. 180 units of output
B. 30 units of output
C. 15 units of output
D. negative

19. Average Product is at its maximum, when ____________________.

A. 6 workers are hired
B. 5 workers are hired
C. 3 workers are hired
D. 2 workers are hired

20. When plotting Marginal Product and Average Product curves, the ___________
Product curve always crosses the ______________ Product curve at its ____________.
A. Marginal; Average; maximum
B. Average; Marginal; minimum
C. Marginal; Average; minimum
D. Average; Marginal; maximum

21. When the Total Product is maximum, Marginal Product is ___________________.

A. positive
B. negative
C. maximum
D. zero

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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

Structured Questions

1. Below is the daily input of a firm for every 8 workers.

Number of Total Product Average Marginal

Capital
workers (unit) Product (unit) Product (unit)
10 1 50 (vi) (xii)
10 2 (i) 55 (xiii)
10 3 (ii) (vii) 25
10 4 150 (viii) (xiv)
10 5 (iii) 32 (xv)
10 6 (iv) (ix) 5
10 7 (v) (x) 0
10 8 160 (xi) (xvi)

a) Provide correct answers for:

(i) (vi) (xi) (xvi)
(ii) (vii) (xii)
(iii) (viii) (xiii)
(iv) (ix) (xiv)
(v) (x) (xv)

b) Without scale, sketch a diagram to show the relationship between Total Product,
Average Product and Marginal Product curves.

c) Does the firm operate in the short-run or long-run? Why?

d) Stage II begins when the firm employ beyond _______ workers and ends when the
firm employ ________ workers.

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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

2. The following table shows diminishing mariginal returns in respect of labour.

Workers Total Product Average Product Marginal Product

0 0 0 0
1 40 (iv) 40
2 (i) 45 (viii)
3 126 (v) 36
4 150 (vi) (ix)
5 (ii) 33 (x)
6 174 (vii) 9
7 (iii) 24 (xi)

a) Provide correct answers for:

(i) (vi) (xi)
(ii) (vii)
(iii) (viii)
(iv) (ix)
(v) (x)

b) With the aid of a diagram, sketch the Total Product, Average Product and Marginal
Product. Indicate the stages of production.

c) At what number of workers is the Total Product at its maximum?

d) Which stage of production a rational producer will choose? State the range of workers
employed.

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PREPARED BY: GEYATHIRI GOPI
BK013 Principles of Economics 1
Tutorial 5 – Semester 1 – 2019

3. The table below shows the relationship between the Total Product of Brilliant and the
number of workers employed.

Labour Total Product Average Product Marginal Product

1 10 10 (ix)
2 (i) (v) 16
3 41 13.67 (x)
4 (ii) (vi) 11
5 60 12 (xi)
6 (iii) (vii) 5
7 67 9.57 (xii)
8 67 (viii) (xiii)
9 (iv) 7 -4

a) Provide correct answers for:

(i) (vi) (xi)
(ii) (vii) (xii)
(iii) (viii) (xiii)
(iv) (ix)
(v) (x)

b) Explain the relationship between Average Product (AP) and Marginal Product (MP).

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PREPARED BY: GEYATHIRI GOPI