1. What is a production function? How does a long-run production function differ from a short-run production...
Question:
1. What is a production function? How does a long-run
production function differ from a short-run production
function?
2. Why is the marginal product of labor likely to increase
initially in the short run as more of the variable input
is hired?
3. Why does production eventually experience diminishing
marginal returns to labor in the short run?
4. You are an employer seeking to fill a vacant position
on an assembly line. Are you more concerned with the
average product of labor or the marginal product of
labor for the last person hired? If you observe that your
average product is just beginning to decline, should you
hire any more workers? What does this situation imply
about the marginal product of your last worker hired?
5. What is the difference between a production function
and an isoquant?
6. Faced with constantly changing conditions, why
would a firm ever keep any factors fixed? What criteria
determine whether a factor is fixed or variable?
7. Isoquants can be convex, linear, or L-shaped. What
does each of these shapes tell you about the nature
of the production function? What does each of these
shapes tell you about the MRTS?
8. Can an isoquant ever slope upward? Explain.
9. Explain the term "marginal rate of technical substitution."
What does a MRTS 4 mean?
10. Explain why the marginal rate of technical substitution
is likely to diminish as more and more labor is
substituted for capital.
11. Is it possible to have diminishing returns to a single
factor of production and constant returns to scale at
the same time? Discuss.
12. Can a firm have a production function that exhibits
increasing returns to scale, constant returns to scale, and
decreasing returns to scale as output increases? Discuss.
13. Suppose that output q is a function of a single input,
labor (L). Describe the returns to scale associated
with each of the following production functions:
1a2 q = L/2 1b2 q = L2 + L 1c2 q = log1L2