Law of Diminishing Returns Quiz

What is a fixed resource in the short run?

• Something you can change easily

• Something you cannot easily change

• The number of workers

• The amount of products

Answer explanation

In the short run, a fixed resource refers to inputs that cannot be easily changed, such as capital or land. This contrasts with variable resources, like labor, which can be adjusted more readily.

In the context of the Law of Diminishing Returns, what happens when too many workers are added?

• Total output increases indefinitely

• Each new worker adds more to total output

• Each new worker adds less to total output

• The kitchen size increases

Answer explanation

According to the Law of Diminishing Returns, adding too many workers leads to each additional worker contributing less to total output, as resources become limited and less efficient.

What is the main difference between the short run and the long run in economics?

• In the short run, all resources can be changed

• In the long run, at least one resource is fixed

• In the short run, at least one resource is fixed

• In the long run, no resources can be changed

Answer explanation

The main difference is that in the short run, at least one resource is fixed, meaning firms cannot adjust all inputs. In contrast, the long run allows all resources to be varied, enabling full adjustment to changes in demand.

What is an example of a variable resource in a hamburger shop?

• The size of the kitchen

• The number of workers

• The location of the shop

• The type of burgers sold

Answer explanation

The number of workers is a variable resource because it can change based on demand. In contrast, the size of the kitchen, location, and type of burgers are fixed resources that do not fluctuate with production needs.

What is the marginal product when the 5th worker is added?

• 25

• 20

• 10

• 0

Answer explanation

The marginal product of the 5th worker is calculated by the additional output produced when this worker is added. In this case, the output increases by 20 units, making the correct answer 20.

According to the Law of Diminishing Returns, what happens after a certain point when more workers are added?

• Each new worker adds more to production.

• Each new worker adds less to production.

• Each new worker adds the same to production.

• Each new worker doubles the production.

Answer explanation

According to the Law of Diminishing Returns, after a certain point, adding more workers results in each new worker contributing less to overall production, making the correct choice: 'Each new worker adds less to production.'

What is a fixed resource in the context of the kitchen example?

• Number of workers

• Kitchen size

• Equipment availability

• Number of hamburgers

Answer explanation

In the kitchen context, a fixed resource refers to something that cannot be easily changed or adjusted. The kitchen size is fixed, as it determines the maximum capacity for operations, unlike the number of workers or equipment availability which can vary.

What is the definition of a variable resource?

• A resource that cannot change in the short run

• A resource that can change in the short run

• A resource that is always fixed

• A resource that never changes

Answer explanation

A variable resource is one that can change in the short run, allowing for flexibility in production. This distinguishes it from fixed resources, which remain constant regardless of short-term changes.

What happens to output when the 7th and 8th workers are added?

• Output increases significantly

• Output remains the same

• Output stops growing or falls

• Output doubles

Answer explanation

When the 7th and 8th workers are added, the output stops growing or may even fall due to diminishing returns, where adding more workers does not lead to a proportional increase in output.

Why does MP initially increase when making hamburgers?

• The firm is more efficient.

• As more workers are added they can divide tasks and specialise.

• One person can make the burgers, one can cook them, and one can help customers. This helps the team work faster and make more food.

• All of these.