1. Consider the example of Xena€™s copy shop. Adding a second worker increased output by 300 pages. If she added a third worker, her output would increase by fewer than ________ pages.
2. If a firm is subject to diminishing marginal returns, an increase in the number of workers decreases the quantity produced. ________ (True/False)
3. Fill in the blanks with at least or less than: If a firm doubles one input but holds the other inputs fixed, we normally expect output to ________ double; if a firm doubles all inputs, we expect output to ________ double.
4. Fill in the blanks with flexible or inflexible: Diminishing return is applicable when a firm is ______in choosing inputs, but does not apply when a firm is_______ in choosing its inputs.
5. Arrows up or down: As a farmer adds more and more fertilizer to the soil, the crop yield______, but at a rate.
6. Feeding the World from a Flowerpot? Comment on the following statement: If agriculture did not experience diminishing returns, we could feed the world using the soil from a small flowerpot.
7. When to Use the Principle of Diminishing Returns? You are the manager of a firm that produces memory chips for mobile phones.
a. In your decision about how much output to produce this week, would you use the principle of diminishing returns? Explain.
b. In your decision about how much output to produce two years from now, would you use the principle of diminishing returns? Explain.
8. Diminishing Returns in Micro-brewing? Your microbrewery produces craft beer, using a single vat, various ingredients, and workers.
a. If you double the number of workers and ingredients, but don t add a second vat, would you expect your output (gallons per hour) to double? Explain.
b. If you double the number of workers and ingredients and add a second vat, would you expect your output (gallons per hour) to double? Explain.
9. Diminishing Returns and the Marginal Principle. Molly s Espresso Shop has become busy, and the more hours Ted works, the more espressos Molly can sell. The price of espressos is $2 and Ted s hourly wage is $11. Complete the following table:

If Molly applies the marginal principle, how many hours should Tedwork?

Transcribed Image Text:

Hours for Espressos Marginal Benefit from Marginal Cost from Additional Hour Additional Hour Sold 100 130 Ted $11 hourly wage $60 $2 x 30 additional espressos 154 172 184 190 193