Question

17) We manufacturer automobiles given the production function q = 5KL where q is the number of autos assembled per eight-hour shift, K is the number of robots used on the assembly line (capital) and L is the number of workers hired per hour (labor). If we use K = 10 robots and L = 10 workers in order to produce q = 450 autos per shift, then we know that production is:
A) technologically efficient.
B) technologically inefficient.
C) maximized.
D) optimal.

18) According to the law of diminishing returns:
A) the total product of an input will eventually be negative.
B) the total product of an input will eventually decline.
C) the marginal product of an input will eventually be negative.
D) the marginal product of an input will eventually decline.

19) At a given level of labor employment, knowing the difference between the average product of labor and the marginal product of labor tells you:
A) whether increasing labor use raises output.
B) whether increasing labor use changes the marginal product of labor.
C) whether economies of scale exist.
D) how increasing labor use alters the average product of labor.

Answer 1

17. Ans: Technologically inefficient.

Explanation:

The production function is,

q = 5KL

Subsrituting the value of K & L,

q = 5 * 10 * 10 = 500

Since the firm produces only 450 autos per shift, therefore, production is technologically inefficient.

18. Ans: The marginal product of an input will eventually decline.

Explanation:

The law of diminishing return states that, keeping some inputs as fixed when the quantity of a variable inputs increases, the marginal product of the input will eventually decline.

19. Ans: How increasing labor use alters the average product of labor.