BR8A: Bridge: Firms, Production, and Profits
Question 1
You’re writing a term paper for one of your courses. Which is the most fixed input in your production of a good grade on the paper?
A. The amount of time you dedicate to working on the paper.
B. The number of sources you use.
C. The amount of time you have to write the paper.
D. The number of times you go to your instructor’s office hours for advice.
Hint
Which of the "inputs" listed here can you change to get a better grade and which are fixed?Answer
C. The amount of time you have to write the paper. The amount of time you have to write the term paper is fixed. You are given the assignment and then a due date. Unless you can convince your instructor for an extension, you likely aren't going to be able to change the amount of total time you have to write the paper.Everything else in the list are inputs that you can change. You can increase or decrease the number of sources you us, the amount of time you actually spend writing the paper (even if you can't change the total amount of time you have, you can change how much of that time you use), or the number of times you ask your instructor for guidance along the way.
Question 2
As more high-speed trains are built, each additional engineer hired to manage construction is likely to increase production
A. at a slower pace, due to diminishing returns.
B. a slower pace, due to negative returns.
C. at a rising pace, due to constant returns.
D. at a rising pace, due to diminishing returns.
Hint
Consider which basic assumption economists make about returns to an input, holding all other inputs constant, and what it implies about output as more units of the input are added.Answer
A. at a slower pace, due to diminishing returns. A basic assumptions of economic analysis is that of diminishing marginal returns—the notion that as additional units of an input are added to a production process, holding all other inputs constant, output rises by decreasing amounts. Thus, each additional engineer hired to manage the construction of high-speed trains is expected to raise output at an increasingly slower pace.Question 3
Varun’s Coaching Center trains runners for elite races. Last week, Varun fired one of his ineffective coaches, and immediately the performance of the runners improved. What does this suggest about the marginal product of the previous coach?
A. The marginal product was zero.
B. The marginal product was positive and large.
C. The marginal product was positive but very small.
D. The marginal product was negative.
Hint
The marginal product is the additional output obtained by employing one additional unit of an input. In this case, the marginal product is the increase in the runners' performance that is brought about by the employment of this coach.Answer
D. The marginal product was negative. Since the ability of the runners improved upon the firing of the ineffective coach, the coach was detracting from the runners' performance.Question 4
Tina’s Craft Palace is eager to expand her production of hand-made quilts. Which of the following would be least helpful in achieving her goal?
A. Encouraging her workers to take quilting classes by paying their tuition.
B. Finding a new distributor to buy less expensive quilting materials.
C. Moving to a larger building to accommodate more workers.
D. Extending her lease on her existing factory.
Hint
To expand production, it may be necessary to expand productive capacity.Answer
D. Extending her lease on her existing factory. To expand production, Tina must increase her capacity to produce quilts. Merely extending her lease on her existing factory won't accomplish this, since it will not increase the volume of quilts she can produce.By contrast, through each of the other options, she can increase her capacity. If she moves to a larger building, she could better accommodate workers and thus will likely increase output. If her workers take quilting classes, their human capital, and thus their productivity, would likely rise, enabling Tina to produce more quilts. Finally, if a new distributor can obtain less expensive quilting materials, Tina's costs of production will fall, again enabling her to produce more quilts.
Question 5
Shan’s Dumpling House can produce 100 dumplings using one worker, and 175 dumplings using two workers. What is the marginal product of the second worker?
A. 75 dumplings
B. 275 dumplings
C. 175 dumplings
D. 25 dumplings