Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank A+

$35.00
Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank A+

Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank A+

$35.00
Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank A+
1. Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would

a.Decrease the demand for yen and decrease the supply of the yen.
b.Increase the demand for yen and decrease the supply of the yen.
c.Increase the demand and increase the supply of yen.
d.Decrease both the supply and the demand of yen.
e.Have no impact on the demand or supply of the yen.

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determinants of Long-Run Trends in Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

2. If the British pound (£) appreciates by 10% against the dollar:

a.both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.
b.the US exporters will find it harder to sell to foreign customers in Britain.
c.the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.
d.both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.
e.all of the above.

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determinants of Long-Run Trends in Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

3. Purchasing power parity or PPP says the ratios composed of:

a.interest rates explain the direction of exchange rates.
b.growth rates explain the direction of exchange rates.
c.inflation rates explain the direction of exchange rates.
d.services explain the direction exchange rates.
e.public opinion polls explain the direction of exchange rates.

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Purchasing Power Parity
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

4. If Janet Yellen, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar?

a.The value of the dollar falls when US interest rates rise.
b.The value of the dollar rises when US interest rates rise.
c.The value of the dollar is not related to US interest rates.
d.This is known as Purchasing Power Parity or PPP.
e.The Federal Reserve has no impact at all on interest rates.

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Free Trade Areas: The European Union and NAFTA
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 8/16/2016 3:41 PM

5. If the domestic prices for traded goods rises 5% in Japan and rises 7% the US over the same period, what would happened to the Yen/US dollar exchange rate? HINT: S1/S0 = (1+πh) / (1+ πf) where S0 is the direct quote of the yen at time 0, the current period.

a.The direct quote of the yen ($/¥) rises, and the value of the dollar falls.
b.The direct quote of the yen ($/¥) falls, and the value of the dollar rises.
c.The direct quote of the yen would remain the same.
d.Purchasing power parity does not apply to inflation rates.
e.Both a and d.

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Import-Export Sales and Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

6. US and Canada can both grow wheat and can do mining. Use the following table to look for which country has a comparative advantage in mining. (HINT: Find the cost of mining in terms of wheat in each country.)

Absolute Cost in US Absolute Cost in Canada
Wheat $5 C$8
Mining $10 C$12

a.Canada has a comparative advantage in mining.
b.The US has a comparative advantage in mining.
c.No comparative advantage in mining exists for either nation.
d.We must first know the exchange rate to be able to answer this question.
e.Both a and b.

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 8/16/2016 4:13 PM

7. The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:

a.Even more intraregional trade of goods across the three countries.
b.Lower transaction costs of trading within North America.
c.A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
d.Less migration of workers across the three countries.
e.An elimination of correlated macroeconomic shocks across the countries.

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Free Trade Areas: The European Union and NAFTA
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

8. If the value of the U.S. dollar rises from 1.0 per dollar to 1.3 per dollar,

a.imports of automobiles from Germany will decline
b.American inflation will increase
c.German exports of all traded goods will decline
d.American exports to Germany will decrease
e.sales by American manufacturers for the export markets will increase.

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Import-Export Sales and Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

9. An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?

a.domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
b.domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
c.domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
d.domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
e.only manufacturers who produce traded goods are affected

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determinants of Long-Run Trends in Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

10. In the last twenty-five years, the Yen and German mark and now the Euro have

a.fluctuated widely against the dollar
b.appreciated against the dollar and then depreciated against the dollar
c.exchanged without restrictions
d.all of the above
e.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: The Market for U.S. Dollars as Foreign Exchange
KEYWORDS: BLOOM’S: Knowledge
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

11. In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will

a.raise the value of the currency
b.lower the nominal interest rate
c.increase the volume of trading in the foreign exchange market
d.lower the trade-weighted exchange rate
e.increase consumer inflation.

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

12. When a manufacturer’s home currency appreciates substantially,

a.domestic sales decline
b.foreign sales decline
c.company-owned foreign plant and equipment will increase
d.margins often decline
e.all of the above

ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

13. An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from

a.higher anticipated costs of production in the U.S.
b.higher interest rates and higher inflation in the U.S.
c.higher growth rates in the trading partner’s economy
d.a change in the terms of trade
e.lower export industry productivity

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Import-Export Sales and Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

14. The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time

a.increase exports
b.reduce the competitive pressure on prices
c.lower the value of the currency in the country with the higher inflation rate
d.increase foreign aid
e.increase the speculative demand for the currency

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Purchasing Power Parity
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

15. Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because

a.out-of-pocket costs of production decline
b.free trade areas protect infant industries
c.economies of scale are present
d.manufacturers face diminishing returns
e.more goods are available for consumption

ANSWER: e
POINTS: 1
DIFFICULTY: Modserate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

16. European Union labor costs exceed U.S. and British labor costs primarily because

a.worker productivity is lower in the EU
b.union wages are higher in the EU
c.layoffs and plant closings are more restrictive in the U.S. and Britain
d.the amount of paid time off is higher in the EU
e.labor-management relations are better in the EU

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Free Trade Areas: The European Union and NAFTA
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

17. Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to

a.sacrifice market share abroad but build market share at home
b.increase production volume to realize learning curve advantages
c.sell foreign plants and equipment to lower their debt
d.reduce the costs of transportation
e.all of the above

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

18. In a recession, the trade balance often improves because

a.service exports exceed manufactured good exports
b.banks sell depressed assets
c.fewer households can afford luxury imports
d.direct investment abroad declines
e.the capital account exceeds the current account

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

19. In Chinese coastal provinces, brick housing for a fast expanding middle class is very comparable in size to housing in the U.S. for a family with median income of $51,000 because

a.median income per capita has risen in China to nearly equal median income in the U.S.
b.the Chinese government builds much of the housing in China
c.construction companies have begun to migrate to the coastal provinces of China
d.housing is an income inferior good
e.bricks, trade skill workers and construction labor are very cheap in China

ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:59 AM

20. The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more than it should to the U.S. trade deficit with China because

a.Chinese assembly labor represents only 47 % of the wholesale cost
b.the iPad’s popularity has triggered an enormous number of unit sales
c.wholesale prices only count in the trade statistics if final product prices are higher
d.as with foreign-assembled minivans, most of the subassembly components come from the U.S.
e.the Chinese yuan is a managed currency

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: International Trade: A Managerial Perspective
KEYWORDS: BLOOM’S: Knowledge
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 9:05 AM

21. Regarding operating risk exposure, which of the following statements is NOT true?

a.​they are more difficult to hedge than transaction risk exposures
b.​they are easier to forecast than translation risk exposures
c.​they necessitate more managerial attention and extensive analysis
d.​only a and b
e.​all of the above are true

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Import-Export Sales and Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 8/16/2016 3:28 PM
DATE MODIFIED: 8/16/2016 4:11 PM

22. Regarding short-range exchange rate movements, which of the following statements is NOT true?

a.they ​may vary from week to week
b.​they may vary from hour to hour
c.​are similar to those of the transaction demand determinants of long-term trends in exchange rates
d.determined by arbitrage activity
e.​both a and b are false

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: The Market for U.S. Dollars as Foreign Exchange
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 8/16/2016 3:29 PM
DATE MODIFIED: 8/16/2016 4:22 PM

Subjective Short Answer

23. Suppose nominal interest rates in the U.S. rise from 4.6% to 5% and decline in Britain from 6% to 5.5%, while U.S. consumer inflation remains unchanged at 1.9% and British inflation declines from 4% to 3%. In addition suppose, real growth in the U.S. is forecasted for next year at 4% and in Britain real growth is forecasted at 5%. Finally, suppose producer price inflation in the U.S. is declining from 2% to 1% while in Britain producer price inflation is rising from 2% to 3.2%. Explain what effect each of these factors would have on the long-term trend exchange rate ( per $) and why?

ANSWER: Nominal interest rates should be adjusted for anticipated inflationary purchasing power loss using current consumer inflation rates as a forecast of future consumer inflation. Hence in the U.S. real rates of interest are 0.4% higher while British real rates have risen by 0.5%, an insignificant difference.

Should the higher real growth rate forecast in Britain prove correct, this factor will cause British imports to increase, American exports to increase, transaction demand for U.S. dollars to increase, and the dollar to appreciate. If the forecasts are reliable, speculators may drive the dollar higher now in anticipation of these events.

Falling producer prices in the U.S. and rising producer prices in Britain imply that American exports will expand again, causing dollar appreciation. The reason is that the PPI measures the expected costs that manufacturers of exports will want to recover in long-term supply contracts written today. So buyers around the world will likely get lower, more attractive prices from American exporters than from British exporters and, therefore, will execute more purchase contracts with American companies.

Two of the three factors suggest longer-term appreciation of the dollar.

POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Subjective Short Answer
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determinants of Long-Run Trends in Exchange Rates
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:58 AM
DATE MODIFIED: 6/21/2016 8:58 AM

Chapter_7___Production_Economics

True / False

1. The marginal product is the incremental change in total output that can be obtained from the use of one more unit of an input in the production process, while varying all other inputs.

a.True
b.False

ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: Production Functions with One Variable Input
KEYWORDS: Knowledge
DATE CREATED: 8/18/2016 1:41 PM
DATE MODIFIED: 8/18/2016 1:59 PM

2. The marginal product is the incremental change in total output that can be obtained from the use of one more unit of an input in the production process, while holding constant all other inputs.

a.True
b.False

ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Knowledge
DATE CREATED: 8/18/2016 1:41 PM
DATE MODIFIED: 8/18/2016 2:00 PM

Multiple Choice

3. What’s true about both the short-run and long-run in terms of production and cost analysis?

a.In the short-run, one or more of the resources are fixed
b.In the long-run, all the factors are variable
c.The time horizon determines whether or not an input variable is fixed or not
d.The law of diminishing returns is based in part on some factors of production being fixed, as they are in the short run.
e.All of the above

ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

4. The marginal product is defined as:

a.The ratio of total output to the amount of the variable input used in producing the output
b.The incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c.The percentage change in output resulting from a given percentage change in the amount
d.The amount of fixed cost involved.
e.None of the above

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

5. Fill in the missing data to solve this problem.

Variable Total Average Marginal
Input Product Product Product
4 ? 70 —-
5 ? ? 40
6 350 ? ?

What is the total product for 5 units of input, and what is the marginal product for 6 units of input?

a.320 and 30
b.350 and 20
c.360 and 15
d.400 and 10
e.430 and 8

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

6. The following is a Cobb-Douglas production function: Q = 1.75K0.5·L0.5. What is correct here?

a.A one-percent change in L will cause Q to change by one percent
b.A one-percent change in K will cause Q to change by two percent
c.This production function displays increasing returns to scale
d.This production function displays constant returns to scale
e.This production function displays decreasing returns to scale

ANSWER: d
POINTS: 1
DIFFICULTY: Mdoerate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Returns to Scale
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

7. Suppose you have a Cobb-Douglas function with a capital elasticity of output (á) of 0.28 and a labor elasticity of output (â) of 0.84. What statement is correct?

a.There are increasing returns to scale
b.If the amount of labor input (L) is increased by 1%, the output will increase by 0.84%
c.If the amount of capital input (K) is decreased by 1%, the output will decrease by 0.28%
d.The sum of the exponents in the Cobb-Douglas function is 1.12.
e.All of the above

ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

8. The Cobb-Douglas production function is: Q = 1.4*L0.6*K0.5. What would be the percentage change in output (%?Q) if labor grows by 3.0% and capital is cut by 5.0%?
[HINT: %?Q = (EL * %?L) + (EK * %?K)]

a.%?Q = + 3.0%
b.%?Q = + 5.0%
c.%?Q = – 0.70%
d.%?Q = – 2.50%
e.%?Q = – 5.0%

ANSWER: c
POINTS: 1
DIFFICULTY: Challenging
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

9. If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?

a.The firm should use relatively more capital
b.The firm should use relatively more labor
c.The firm should not make any changes – they are currently efficient
d.Using the Equimarginal Criterion, we can’t determine the firm’s efficiency level
e.Both c and d

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

10. The marginal rate of technical substitution may be defined as all of the following except:

a.the rate at which one input may be substituted for another input in the production process, while total output remains constant
b.equal to the negative slope of the isoquant at any point on the isoquant
c.the rate at which all combinations of inputs have equal total costs
d.equal to the ratio of the marginal products of X and Y
e.b and c

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production with Multiple Variable Inputs
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

11. The law of diminishing marginal returns:

a.states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns
b.is a mathematical theorem that can be logically proved or disproved
c.is the rate at which one input may be substituted for another input in the production process
d.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

12. The combinations of inputs costing a constant C dollars is called:

a.an isocost line
b.an isoquant curve
c.the MRTS
d.an isorevenue line
e.none of the above

ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: Determining the Optimal Combination of Inputs
KEYWORDS: BLOOM’S: Knowledge
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

13. In a relationship among total, average and marginal products, where TP is maximized:

a.AP is maximized
b.AP is equal to zero
c.MP is maximized
d.MP is equal to zero
e.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

14. Holding the total output constant, the rate at which one input X may be substituted for another input Y in a production process is:

a.the slope of the isoquant curve
b.the marginal rate of technical substitution (MRTS)
c.equal to MPx/MPy
d.all of the above
e.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determining the Optimal Use of the Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

15. Which of the following is never negative?

a.marginal product
b.average product
c.production elasticity
d.marginal rate of technical substitution
e.slope of the isocost lines

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

16. Concerning the maximization of output subject to a cost constraint, which of the following statements (if any) are true?

a.At the optimal input combination, the slope of the isoquant must equal the slope of the isocost line.
b.The optimal solution occurs at the boundary of the feasible region of input combinations.
c.The optimal solution occurs at the point where the isoquant is tangent to the isocost lines.
d.all of the above
e.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determining the Optimal Use of the Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

17. In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:

a.stage II
b.stages I and II
c.when Ep = 1
d.stage III
e.none of the above

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

18. Marginal revenue product is:

a.defined as the amount that an additional unit of the variable input adds to the total revenue
b.equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c.equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d.a and b
e.a and c

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

19. The isoquants for inputs that are perfect substitutes for one another consist of a series of:

a.right angles
b.parallel lines
c.concentric circles
d.right triangles
e.none of the above

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production with Multiple Variable Inputs
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

20. In production and cost analysis, the short run is the period of time in which one (or more) of the resources employed in the production process is fixed or incapable of being varied.

a.trueb.false

ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

21. 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

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Determining the Optimal Use of the Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

22. 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

ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Analytic
TOPICS: Determining the Optimal Use of the Variable Input
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

23. The isoquants for inputs that are perfect complements for one another consist of a series of:

a.right angles
b.parallel lines
c.concentric circles
d.right triangles
e.none of the above

ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: Production with Multiple Variable Inputs
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

24. Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.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

ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

25. The primary purpose of the Cobb-Douglas power function is to:

a.allow one to make estimates of cost-output relationships
b.allow one to make predictions about a resulting increase in output for a given increase in the inputs
c.aid one in gaining accurate empirical values for economic variables
d.calculate a short-run linear total cost function
e.a and b

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

26. The original Cobb-Douglas function was given as. It was subsequently rewritten as. What benefit was derived in the revision?

a.the function becomes a non-linear relationship so it would fit to production curves having an “S” shape
b.returns to scale can be shown in the revision
c.returns to scale become constant
d.a and b only
e.a, b, and c

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

27. The Cobb-Douglas production function has which of the following properties?

a.output is a linear increasing function of each of the inputs
b.it provides a good fit to the traditional S-shaped production function
c.the elasticity of production is constant and equal to 1 minus the exponent of the appropriate variable
d.all of the above
e.none of the above

ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

28. In the Cobb-Douglas production function ():

a.the marginal product of labor (L) is equal to β1
b.the average product of labor (L) is equal to β2
c.if the amount of labor input (L) is increased by 1 percent, the output will increase by β1 percent
d.a and b
e.a and c

ANSWER: c
POINTS: 1
DIFFICULTY: Challenging
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: The Production Function
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

Essay

29. Emco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule:

Crew SizeTotal Output
(No. of Workers)(No. of Units)
00
110
235
350
456
559
660
760
858

Determine the following schedules:

(a)marginal productivity of labor
(b)average productivity of labor
(c)elasticity of production with respect to labor

ANSWER:

Crew SizeTotal Output(a)(b)(c)
LQ
0 0
110+10101.00
235+2517.51.43
350+1516.67 .90
456 +614 .43
559 +311.8 .25
660 +110 .10
760 0 8.57 .00
858 −2 7.25−.28
POINTS: 1
DIFFICULTY: Challenging
QUESTION TYPE: Essay
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: Production Functions with One Variable Input
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

30. A certain production process employs two inputs–labor (L) and raw materials (R). Output (Q) is a function of these two inputs and is given by the following relationship:

Q = 6L2 R2 − .10L3 R3

Assume that raw materials (input R) are fixed at 10 units.

(a)Determine the total product function (TPL) for input L.
(b)Determine the marginal product function for input L.
(c)Determine the average product function for input L.
(d)Find the number of units of input L that maximizes the total product function.
(e)Find the number of units of input L that maximizes the marginal product function.
(f)Find the number of units of input L that maximizes the average product function.
(g)Determine the boundaries for the three stages of production.

ANSWER:

(a)
(b)
(c)
(d)
L = 4 (L = 0 is not a maximum, since d2 (TPL)/dL2 > 0)
(e)
(f)
(g)Stage I0-3APL increasing
Stage II3-4MPL > 0
Stage III4-∞MPL ≤ 0
POINTS: 1
DIFFICULTY: Challenging
QUESTION TYPE: Essay
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: Production with Multiple Variable Inputs
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

31. An industry can be characterized by the following production function:

Q = 2.5L.60 C.40

(a)What is the algebraic expression for the marginal productivity of labor?
(b)What is the algebraic expression for the average productivity of labor?
(c)How would you characterize the returns-to-scale in the industry?

ANSWER:

(a)
(b)
(c)This production function is of the Cobb-Douglas form and the sum of the exponents of the labor and capital variables indicate the returns to scale. Since the sum of the exponents is 1.0 (.60 + .40), this production function exhibits constant returns to scale, i.e., a λ-factor increase in each of the inputs will yield exactly a λ-factor increase in output.
POINTS: 1
DIFFICULTY: Challenging
QUESTION TYPE: Essay
HAS VARIABLES: False
NATIONAL STANDARDS: United States – BPRPOG: Analysis
TOPICS: Production with Multiple Variable Inputs
KEYWORDS: BLOOM’S: Analysis
DATE CREATED: 6/21/2016 8:44 AM
DATE MODIFIED: 6/21/2016 8:44 AM

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