dkishore1

Holding the quantity of labor constant, output increases as the quantity of capital increases, but at a decreasing rate. This phenomenon is most accurately described as:

A) diminishing marginal product of capital.

B) diminishing marginal costs of capital.

C) diminishing average returns to capital.

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The marginal product of capital is the change in output divided by a unit change in capital, holding labor constant. Diminishing marginal product of capital means that at a constant level of labor, output increases as capital is added, but at a decreasing rate.

dkishore1

Which of the following statements regarding diminishing marginal returns is most accurate?

A) As the quantity produced rises, costs begin to rise at a decreasing rate.

B) The total cost curve arches downward.

C) As the quantity produced rises, costs begin to rise at an increasing rate.

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At production levels that are consistent with decreasing marginal returns, costs will increase at an increasing rate as production rises.

dkishore1

At a fixed level of capital, output increases as the quantity of labor increases, but at a decreasing rate. This phenomenon is an example of:

A) law of diminishing costs to labor.

B) law of diminishing returns to labor.

C) law of diminishing returns to capital.

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The law of diminishing returns states that at some point, as more and more of a resource (e.g., labor) is devoted to a production process, holding the quantity of other inputs constant, the output increases, but at a decreasing rate.

dkishore1

According to the law of diminishing returns, doubling the number of salespeople for a firm will most likely result in:

A) decreasing the total sales of the firm as a result of competition amongst salespeople.

B) doubling the total sales of the firm.

C) increasing the total sales of the firm and reducing the average sales per salesperson.

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The law of diminishing returns states that as more of a resource is added to a production process, holding other resource use constant, increases in output will eventually decrease. Therefore, as more salespeople are added they will generate more sales at a decreasing rate. Total sales will increase and the average sales per salesperson will decrease.

dkishore1

The law of diminishing returns states that for a given production process, as more and more of a resource (such as labor) are added, holding the quantities of other resources fixed:

A) cost declines at a decreasing rate.

B) output increases at a decreasing rate.

C) cost declines at an increasing rate.

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The law of diminishing returns states that for a given production process, as more and more resources (such as labor) are added holding the quantities of other resources fixed, output increases at a decreasing rate. This occurs because, at some point, adding more workers results in inefficiencies.

dkishore1

Based on the concept of diminishing returns, as the quantity of output increases, the short-run marginal costs of production eventually:

A) rise at an increasing rate.

B) fall at a decreasing rate.

C) rise at a decreasing rate.

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The law of diminishing returns states that as more variable resources are a production process combined with a fixed input, output will eventually increase at a decreasing rate. In the short run, as the quantity produced rises, costs rise at an increasing rate.

dkishore1

The law of diminishing returns states that at some point as:

A) less of a resource are devoted to production, holding the quantity of other inputs constant, the output will decrease, but at an increasing rate.

B) more of a resource is devoted to production, holding the quantity of other inputs constant, at some point output will begin to decrease.

C) more of a resource is devoted to production, holding the quantity of other inputs constant, the output will increase, but at a decreasing rate.

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At low levels of output, increasing marginal returns will exist corresponding to the downward sloping portion of the marginal cost curve. As marginal costs begin to increase diminishing marginal returns will occur.

dkishore1

Assume that output increased from 1,550 to 1,850 units per day as a result of increasing labor from 200 to 210 workers. The marginal product of labor is closest to:

A) 1.55 units per day per worker.

B) 30 units per day per worker.

C) 1.25 units per day per worker.

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Marginal product is the additional output per additional unit of an input (labor). Since output changed by 300 units and labor changed by 10 workers, the marginal product is 300 / 10 = 30 units per day per worker.

dkishore1

Typically, the short-run marginal product curve for an input used in production:

A) increases proportionately to output.

B) decreases proportionately to output.

C) increases initially, reaches a peak, and then declines.

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The marginal product curve for an input typically increases initially, reaches a peak at some point, and then decreases (marginal cost increases) as additional units of the input are used, holding the quantities of other factors constant.

dkishore1

Which of the following most accurately describes the condition that typically exists when marginal product is at a maximum?

A) Average variable cost is at a minimum.

B) Marginal cost is at a minimum.

C) Average product is at a minimum.

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Marginal product is at a maximum when marginal cost is at a minimum. At the corresponding labor and output levels, average variable cost is decreasing and average product in increasing.