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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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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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Conceptual questions on microeconomics

A firm used a combination of inputs that was to the left of its isocost line, it would indicate that
a. it is exceeding its budget.
b. it is not spending all of its budget.
c. it is operating at its optimal point because it is saving money.
d. None of the above.

When the exponents of a Cobb-Douglas production function sum to more than 1, the function exhibits
a. constant returns.
b. increasing returns
c. decreasing returns.
d. either increasing or decreasing returns.

What does the following Cobb-Douglas production function, Q = 1.8L0.74K0.36, exhibit
a. increasing returns.
b. constant returns.
c. decreasing returns.
d. Both A and B.

Marginal rates of technical substitution (MRTS) represent
a. the optimum combinations of inputs.
b. cost minimizing combinations of inputs.
c. the degree to which one input can replace another without output changing.
d. All of the above.

If a firm is using two inputs, X and Y, is using them in the most efficient manner when
a. MPX = MPY.
b. PX = PY and MPX = MPY.
c. MPX/PY = MPY/PX.
d. MPX/MPY = PX/PY.
e. none of the above

Which of the following would indicate when Stage II ends and Stage III begins in the short-run production function?
a. when AP = 0
b. when MP = 0
c. when MP = AP
d. when MP starts to diminish
e. none of the above

In economic theory, if an additional worker adds less to the total output than previous workers hired, it is because
a. there may be less that this person can do, given the fixed capacity of the firm.
b. he/she is less skilled than the previously hired workers.
c. everyone is getting in each other's way.
d. the firm is experiencing diminishing returns to scale.
e. none of the above

A major advantage of the ________ production function is that it can be easily transformed into a linear function, and can be analyzed with the linear regression method.
a. cubic
b. power
c. quadratic
d. linear
e. None of the above.

________ functions are very useful in an analyzing production functions, which exhibit both increasing and decreasing marginal products.
a. Cobb-Douglas
b. Straight-line
c. Quadratic
d. Cubic
e. None of the above.

In the short run, finding the optimal amount of variable input involves which relationship?
a. MP = MC
b. AP = MP
c. MP = 0
d. MRP = MFC
e. none of the above

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