ECO111 CHAPTER 18

The production function is the

• a.

  increase in the amount of output from an additional unit of labor.

• b.

  marginal product of an input times the price of output.

• c.

  relationship between the quantity of inputs and output.

• d.

  shift in labor demand caused by a change in the price of output.

Economists refer to the inputs that firms use to produce goods and services as

• a.

  derived factors.

• b.

  derived resources.

• c.

  factors of production.

• d.

  instruments of revenue

What does the term 'marginal product' refer to in the production function?

• a.

  the increase in the amount of output from an additional unit of labor.

• b.

  the relationship between the quantity of inputs and output.

• c.

  the shift in labor demand caused by a change in the price of output.

• d.

  the marginal cost of production.

Which term is used by economists to describe the factors that firms use to produce goods and services?

• a.

  derived factors.

• b.

  derived resources.

• c.

  factors of production.

• d.

  instruments of revenue

What is the main focus of the production function in economics?

• a.

  Maximizing profits.

• b.

  Minimizing costs.

• c.

  Optimizing the relationship between inputs and outputs.

• d.

  Regulating market competition.

Factor markets are different from product markets in an important way because

• a.

  equilibrium is the exception, and not the rule, in factor markets.

• b.

  the demand for a factor of production is a derived demand.

• c.

  the demand for a factor of production is likely to be upward sloping, in violation of the law of demand.

• d.

  All of the above are correct.

When a firm maximizes profit,

• a.

  it will hire workers up to the point where the marginal product of labor is equal to the product price.

• b.

  it will hire workers up to the point where the marginal product of labor is equal to the wage.

• c.

  it will hire workers up to the point where the value of the marginal product of labor is equal to the product price.

• d.

  it will hire workers up to the point where the value of the marginal product of labor is equal to the wage.

For a competitive, profit-maximizing firm, the labor demand curve is the same as the

• a.

  marginal cost curve.

• b.

  value of marginal product curve.

• c.

  production function.

• d.

  profit function.

Diminishing marginal product affects the shape of the production function in what way?

• a.

  The slope of the production function decreases as the quantity of input increases.

• b.

  The production function becomes steeper as the quantity of input increases.

• c.

  The production function slopes downward.

• d.

  The production function is horizontal beyond a certain quantity of input.

Diminishing marginal product occurs when

• a.

  the marginal product of an input increases as the quantity of the input increases.

• b.

  the marginal product of an input decreases as the quantity of the input increases.

• c.

  total output increases as the quantity of an input increases.

• d.

  total output decreases as the quantity of an input increases.