Production Function: Definition, Types, and Applications

Question 1

As per the law of diminishing returns, what happens to the marginal product of a variable input when its quantity increases while other inputs remain constant?

Accepted Answer

Initially increases and then decreases

Answer

Increases indefinitely

Answer

Decreases indefinitely

Question 2

Which of the following is NOT a type of production function?

Accepted Answer

Average product function

Answer

Long-run production function

Answer

Short-run production function

Question 3

Identify the option that is NOT a factor of production:

Accepted Answer

Time

Answer

Capital

Answer

Land

Answer

Labor

Question 4

A production function is a mathematical equation that represents the relationship between:

Accepted Answer

Inputs and outputs

Answer

Price and quantity

Answer

Marginal cost and marginal revenue

Answer

Demand and supply

Question 5

According to the law of diminishing returns, as more of a variable input is employed while keeping other inputs constant, the:

Accepted Answer

Marginal product will eventually decrease

Answer

Average product will remain constant

Answer

Marginal product will increase indefinitely

Answer

Total product will decline

Question 6

Which of the following is a characteristic of a short-run production function?

Accepted Answer

One or more inputs are fixed

Answer

Represents the maximum possible output for given inputs

Answer

The law of increasing returns applies

Answer

All inputs are variable

Question 7

An isoquant is a curve that depicts combinations of inputs that yield:

Accepted Answer

Equal levels of output

Answer

Maximum revenue

Answer

Different profit levels

Answer

Minimum cost

Question 8

A production function describes the relationship between:

Accepted Answer

Inputs and outputs in a production process.

Answer

Costs and profits in a production process.

Answer

Producers and consumers in a market.

Answer

Demand and supply in a market.

Question 9

According to the law of diminishing returns, as one input is increased while others are held constant, what happens?

Accepted Answer

Marginal product eventually decreases.

Answer

Total product continuously increases.

Answer

The relationship is not predictable.

Answer

Average product consistently increases.

Question 10

In the short-run production function, it is assumed that:

Accepted Answer

At least one input is fixed in quantity.

Answer

The production process is always efficient.

Answer

All inputs are variable in quantity.

Answer

Output is always at its maximum level.

Question 11

An isoquant:

Accepted Answer

Shows all combinations of inputs that yield a specific level of output.

Answer

Indicates the maximum profit that can be achieved.

Answer

Represents the minimum cost of producing a specific output.

Answer

Depicts the optimal combination of inputs for a specific price.

Question 12

The slope of an isoquant indicates the:

Accepted Answer

Marginal rate of technical substitution (MRTS) between inputs.

Answer

Marginal product of capital.

Answer

Average product of labor.

Answer

Total product of inputs.

Question 13

In the long run, all inputs are considered to be:

Accepted Answer

Variable in quantity.

Answer

Fixed in quantity.

Answer

Semi-fixed in quantity.

Answer

Partially variable in quantity.

Question 14

One of the main benefits of using production functions is that they:

Accepted Answer

Help determine the optimal combination of inputs for a desired output level.

Answer

Guarantee maximum profits for firms.

Answer

Eliminate the need for historical data.

Answer

Provide precise predictions of future output levels.

Question 15

Which of the following is an input factor in a production function?

Accepted Answer

Labor

Answer

Price

Answer

Profit

Answer

Demand

Question 16

What is the term describing the decrease in output per unit of input as more of that input is added?

Accepted Answer

Law of diminishing returns

Answer

Marginal product

Answer

Economies of scale

Answer

Short-run production function

Question 17

Which production function shows the maximum output achievable with a given combination of inputs?

Accepted Answer

Long-run production function

Answer

Average product function

Answer

Total product function

Answer

Short-run production function

Question 18

What formula calculates the marginal product of labor?

Accepted Answer

Change in output divided by Change in labor input

Answer

Average output divided by Marginal output

Answer

Output per unit of labor

Answer

Total output minus Total labor input

Question 19

Which graph represents an isoquant?

Accepted Answer

A curve illustrating input combinations that produce the same output level

Answer

A straight line connecting two points on a production function

Answer

A set of points showing different input and output combinations

Question 20

What is the slope of an isoquant?

Accepted Answer

The negative of the marginal rate of technical substitution

Answer

The marginal product of labor

Answer

The average product of labor

Question 21

How are production functions and cost functions related?

Accepted Answer

The production function shows input combinations for a given output, while the cost function shows the costs of those input combinations.

Answer

The cost function is the inverse of the production function.

Question 22

Which application of production functions is used in economics?

Accepted Answer

Optimizing resource allocation

Answer

Measuring economic growth

Answer

Predicting stock market prices

Answer

Determining tax rates

Question 23

What is the distinction between a total product function and an average product function?

Accepted Answer

The total product function shows total output produced, while the average product function shows output per unit of input.

Answer

The total product function is linear, while the average product function is non-linear.

Question 24

The short-run production function assumes:

Accepted Answer

At least one input is fixed.

Answer

Output is always constant.

Answer

The law of diminishing returns does not apply.

Answer

All inputs are variable.

Question 25

The law of diminishing returns states that

Accepted Answer

As more of one variable input is used, the marginal product of that input eventually decreases.

Answer

The optimal combination of inputs always involves equal proportions.

Answer

Output increases indefinitely with all inputs.

Question 26

An isoquant map shows

Accepted Answer

Combinations of inputs that produce the same output level.

Answer

The relationship between fixed and variable costs.

Answer

The optimal combination of inputs for a given output.

Question 27

The marginal product of labor is equal to:

Accepted Answer

The change in output resulting from a one-unit increase in labor.

Answer

The total output produced by labor.

Answer

The average output per unit of labor.

Question 28

The optimal combination of inputs occurs when:

Accepted Answer

The marginal product per input is equal.

Answer

The average cost of production is minimized.

Answer

The total cost of production is minimized.

Question 29

Which of the following correctly represents the equation for a simple production function?

Accepted Answer

Q = f(L, K)

Answer

Q = f(L + K)

Answer

Q - L = f(K)

Answer

Q * L = f(K)

Question 30

State the law of diminishing returns.

Accepted Answer

As more of one input is added while holding others constant, the marginal product of that input will eventually decrease.

Answer

As more of one input is added while holding others constant, the average product of that input will increase.

Question 31

Define the short-run production function.

Accepted Answer

A production function where at least one input is fixed.

Answer

A production function that describes the maximum possible output.

Answer

A production function where all inputs are variable.

Question 32

Explain the difference between fixed and variable inputs.

Accepted Answer

Fixed inputs cannot be changed in the short run, while variable inputs can.

Answer

Variable inputs are more expensive than fixed inputs.

Answer

Fixed inputs are used to produce goods, while variable inputs are used to provide services.

Question 33

What is an isoquant and what does it represent?

Accepted Answer

An isoquant is a curve that shows all combinations of inputs that produce the same level of output.

Answer

An isoquant is a line that shows the maximum possible output.

Answer

An isoquant is a surface that shows all combinations of inputs.

Question 34

What does the slope of an isoquant represent?

Accepted Answer

The marginal rate of technical substitution (MRTS).

Answer

The law of diminishing returns.

Answer

The average rate of technical substitution (ARTS).

Question 35

Explain the significance of the slope of an isoquant.

Accepted Answer

It shows the trade-off between inputs while keeping output constant.

Answer

It indicates the maximum possible output.

Answer

It depicts the relationship between inputs and outputs.

Question 36

Describe the relationship between isoquants and the production function.

Accepted Answer

Isoquants are contour lines of the production function.

Answer

Isoquants are perpendicular to the production function.

Answer

Isoquants are parallel to the production function.

Question 37

Describe the practical applications of production functions in economic analysis.

Accepted Answer

Production functions are used to predict output, analyze costs, and make investment decisions.

Answer

Production functions are used to set interest rates.

Answer

Production functions are used to determine the minimum wage.

Question 38

Which of the following statements most accurately defines a production function?

Accepted Answer

The relationship between the quantities of inputs used and the quantity of output produced

Answer

The revenue generated from selling a given quantity of output

Answer

The cost of producing a given quantity of output

Question 39

A manufacturing firm uses two inputs, labor (L) and capital (K), to produce its output. Its production function is Q = 10L^0.5K^0.5. What type of production function is this?

Accepted Answer

Cobb-Douglas

Answer

Quadratic

Answer

Linear

Answer

Leontief

Question 40

In the short run for a manufacturing firm, which of the following is typically considered a fixed factor of production?

Accepted Answer

Factory size

Answer

Number of workers employed

Answer

Electricity consumption

Answer

Cost of raw materials

Question 41

An isoquant curve graphically represents:

Accepted Answer

Combinations of inputs that yield the same level of output

Answer

Different levels of output produced with a fixed input combination

Answer

The marginal rate of technical substitution between inputs

Question 42

If a production function exhibits decreasing returns to scale, what happens to output when all inputs are doubled?

Accepted Answer

Output less than doubles

Answer

Output exactly doubles

Answer

Output remains the same

Answer

Output more than doubles

Question 43

In a perfectly competitive market, which of the following statements is true for firms?

Accepted Answer

They are price takers

Answer

They can set production quotas

Answer

They can influence the market price

Answer

They have control over the quality of their products

Question 44

Technological advancements are likely to have what effect on a production function?

Accepted Answer

Shift it upwards

Answer

Make it steeper

Answer

Have no effect on it

Answer

Shift it downwards

Question 45

A firm's marginal product of labor is 10 units. The market price of the output is £5 per unit. What is the firm's marginal revenue product of labor?

Accepted Answer

£50

Answer

£25

Answer

£10

Answer

Cannot be determined from the information given

Question 46

What is the slope of an isoquant curve known as?

Accepted Answer

Marginal rate of technical substitution

Answer

Marginal product of capital

Answer

Returns to scale

Answer

Marginal product of labor

Question 47

Which of the following accurately defines a production function?

Accepted Answer

A mathematical equation that illustrates the maximum output achievable given specific inputs.

Answer

A graphical representation of the costs associated with various output levels.

Question 48

In the short run, a firm's production function is characterized by:

Accepted Answer

Fixed proportions of at least one input.

Answer

Completely variable input proportions.

Answer

Only variable capital proportions.

Answer

Only variable labor proportions.

Question 49

According to the principle of diminishing returns:

Accepted Answer

As more of a variable input is added while keeping other inputs fixed, the incremental output will eventually decrease.

Answer

Output consistently rises proportionally to the increase in inputs.

Question 50

An isoquant is a graphical representation of:

Accepted Answer

All possible combinations of inputs that yield a specific level of output.

Answer

The optimal combination of inputs for a given output level.

Answer

The relationship between input pricing and output quantity.

Question 51

Which factor does NOT influence the shifting of a production function?

Accepted Answer

Alterations in input prices.

Answer

Enhancements in workforce skills.

Answer

Technological advancements.

Answer

Changes in resource availability.

Question 52

The marginal product of labor refers to:

Accepted Answer

The additional output dihasilkan from employing one additional unit of labor.

Answer

The shift in output caused by a change in capital.

Answer

The total output produced by all labor units.

Question 53

Given the production function Q = 10L^0.5K^0.5, if 16 units of labor and 9 units of capital are utilized, what is the marginal product of labor?

Accepted Answer

1.875 units

Answer

15 units

Answer

3.75 units

Answer

7.5 units

Question 54

Which of the following accurately describes the relationship between the marginal product of labor (MPL) and the total product (TP) curve?

Accepted Answer

When the TP curve is increasing, the MPL is positive; when the TP curve is decreasing, the MPL is negative.

Answer

The MPL is consistently positive.