Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAP. 6] THEORY OF PRODUCTION 127
5. If, by increasing the quantity of labor used by one unit, the firm can give up 2 units of capital and still produce the
same output, then the MRTS LK is (a) 1 2
,(b) 2,(c) 1,or(d) 4.
Ans. (b) See Section 6.5.
6. If the MRTS LK equals 2, then the MP K /MP L is (a) 2,(b) 1,(c) 1 2
,or(d) 4.
Ans. (c) See Section 6.5.
7. Within the relavant range, isoquants (a) are negatively sloped, (b) are convex to the origin, (c) cannot cross, or (d)
are all of the above.
Ans. (d) See Section 6.6.
8. If we plot capital on the vertical axis and labor on the horizontal axis, the slope of a straight-line isocost drawn on
such a graph is (a) P L /P K ,(b) P K /P L ,(c) 2P L /P K ,or(d) 2P K /P L .
Ans. (c) See Section 6.7.
9. At the point of producer equilibrium, (a) the isoquant is tangent to the isocost, (b) the MRTS LK equals P L /P K ,
(c) MP L /P L ¼ MP K /P K ,or(d) all of the above.
Ans. (d) See Section 6.8.
10. The expansion path of production theory is analogous in consumption theory to the (a) price-consumption line,
(b) Engle curve, (c) income-consumption line, or (d) budget constraint line.
Ans. (c) Compare Fig. 6-7 in this chapter to Fig. 4-6 in Chapter 4.
11. The elasticity of technical substitution is measured by (a) the slope of the isoquant, (b) the change in the slope of the
isoquant, (c) the ratio of factor inputs, or (d) none of the above.
Ans. (d) The MRTS LK , the change in the MRTS LK , the K/L ratio, and the change in the K/L ratio are all components
of the coefficient of elasticity of technical substitution but cannot individually give us that coefficient.
(Two exceptions to this are discussed in Problem 6.23.)
12. If we have constant returns to scale and we increase the quantity of labor used per unit of time by 10% but keep the
amount of capital constant, output will (a) increase by 10%, (b) decrease by 10%, (c) increase by more than 10%, or
(d) increase by less than 10%.
Ans. (d) Under constant returns to scale, if we increase both labor and capital by 10%, output will also increase by
10%. Since we are increasing only labor by 10%, output will increase by less than 10% (if we are operating within
stage II of production).
Solved Problems
PRODUCTION WITH ONE VARIABLE INPUT
6.1 From Table 6.4, (a) find the AP and the MP of labor and (b) plot the TP, and the AP and MP of labor
curves.
Table 6.4
Land 1 1 1 1 1 1 1 1 1 1
Labor 0 1 2 3 4 5 6 7 8 9
TP 0 2 5 9 12 14 15 15 14 12