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# Cobb-Douglas production function

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1. Which of the following statements concerning marginal utility is (are) true?

a. marginal utility measures the satisfaction the individual receives from a given incremental change in wealth
b. marginal utility is given by the reciprocal of the slope
c. a and b
d. none of the above

2. Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

a. As the price declines, the real income of the consumer increases.
b. As the price of product A declines, it makes it more attractive than product B
c. As the price declines, the consumer will always demand more on each successive price reduction
d. A and B
e. A and C

3. When demand is _____________ a percentage change in ___________ is exactly offset by the same percentage change in _____________ demanded, the net result being a constant total consumer expenditure.

a. elastic; price; quantity
b. unit elastic; price; quantity
c. inelastic; quantity; price
d. inelastic; price; quantity
e. none of the above

4. A price elasticity (ED) of -1.50 indicates that for a ____________ increase in price, quantity demanded will ____________ by ______________.

a. one percent; increase; 1.50 units
b. one unit; increase; 1.50 units
c. one percent; decrease; 1.50 percent
d. one unit; decrease; 1.50 percent
e. ten percent; increase; fifteen percent

5. Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____________.

a. marginal revenue
b. total output
c. total revenue
d. marginal product
e. none of the above

6. Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ________________.

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

7. Given a Cobb-Douglas production function estimate of Q = 1.19L0.72K0.18 for a given industry, this industry would have:

a. increasing returns to scale
b. constant returns to scale
c. decreasing returns to scale
d. negative returns to scale
e. none of the above

8. In the Cobb-Douglas production function (Q = L 1K 2):

a. the elasticity of production with respect to labor (L) is equal to the ratio of MPL to APL
b. the elasticity of production with respect to labor (L) is equal to > 1
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by > 1 percent
d. b and c
e. a, b, and c

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#### Solution Preview

1. Which of the following statements concerning marginal utility is (are) true?

a. marginal utility measures the satisfaction the individual receives from a given incremental change in wealth

Reason: Marginal utility is given by the slope and not by the reciprocal of the slope.

2. Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

d. A and B
Reason: A is income effect and B is substitution effect.

3. When demand is ...

#### Solution Summary

Cobb-Douglas production function is cited.

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