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What- true about both the short-run and long-run 



1.	What- true about both the short-run and long-run in terms of production and cost analysis?
a.	In the short-run, one or more of the resources are fixed
b.	In the long-run, all the factors are variable
c.	The time horizon determines whether or not an input variable is fixed or not
d.	The law of diminishing returns is based in part on some factors of production being fixed, as they are in the short run.
e.	All of the above

	

2.	The marginal product is defined as:
a.	The ratio of total output to the amount of the variable input used in producing the output
b.	The incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c.	The percentage change in output resulting from a given percentage change in the amount
d.	The amount of fixed cost involved.
e.	None of the above

	

3.	Fill in the missing data to solve this problem.

Variable		Total		Average	Marginal
Input		Product		Product		Product
4			     ?		   70		    ----
5			     ?		     ?		    40
6			  350		     ?	     ?
What is the total product for 5 units of input, and what is the marginal product for 6 units of input?
a.	320 and 30
b.	350 and 20
c.	360 and 15
d.	400 and 10
e.	430 and 8

	

4.	The following is a Cobb-Douglas production function:  Q = 1.75K0.5∙L0.5.  What is correct here?
a.	A one-percent change in L will cause Q to change by one percent
b.	A one-percent change in K will cause Q to change by two percent
c.	This production function displays increasing returns to scale
d.	This production function displays constant returns to scale
e.	This production function displays decreasing returns to scale

	 
5.	Suppose you have a Cobb-Douglas function with a capital elasticity of output (α) of 0.28 and a labor elasticity of output (β) of 0.84.  What statement is correct?
a.	There are increasing returns to scale
b.	If the amount of labor input (L) is increased by 1%, the output will increase by 0.84%
c.	If the amount of capital input (K) is decreased by 1%, the output will decrease by 0.28%
d.	The sum of the exponents in the Cobb-Douglas function is 1.12.
e.	All of the above



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