Question

10. When the price of a good changes, the total effect of the price change on the quantities
purchased can be found by comparing the quantities purchased
A) on the old budget line and the new budget line.
B) on the original indifference curve when faced with the original prices and when faced with
the new prices.
C) on the new budget line and a hypothetical budget line that is a parallel shift back to the
original indifference curve.
D) on the new indifference curve.

11. If the marginal product of labor is constant for all levels of output, then the average
product of labor
A) is constant.
B) equals the marginal product of labor.
C) Both A and B above.
D) Either A or B above but not both.

12. At any given point on the curve, the slope of the total product curve always equals
A) the ratio of the marginal product and the average product.
B) the change in input divided by the change in output.
C) the average product of the input.
D) the marginal product of the input.

13. One way to explain the convexity of isoquants is to say that
A) as labor increases and capital decreases, rises while falls.
B) as labor increases and capital decreases, falls while rises.
C) as labor increases and capital decreases, and both fall.
D) as labor increases and capital decreases, and both rise.

14. Suppose that electric bikes are produced according to the following production function:
q = L0.4 K0.4. The firm currently produces units. If all inputs doubled, the new level of
output will equal
A) 20.4 q1.
B) 20.8 q1.
C) 0.8 q1.
D) 1.6 q1.

Answer 1

10. B) is correct. Total change is calculated by comparing the old budget line with old indifference curve and the new budget line with new indifference curve.

11. C) is correct. When marginal product of labour is constant, then average product of labour is also constant as well as equal to the marginal product of labour.

12. D) is correct. The slope of total product of input is equal to the marginal productof the input.

13. B) is correct. When labour increases and capital decreases, MPL falls while MPK rises.

14. B) 20.8 ql is the correct option. When we put 2L in place of L and 2K in place of K in the function, the value increases by 20.8.