Exam #2 (pt. 2 - WS 5)

Question 1

Most inputs in production processes can be:

a. substituted for each other, but not perfectly
b. substituted for each other, perfectly
c. not substituted for each other
d. not enough information to know

Answer 1

a.

Question 2

Perfect substitutes in production have:

a. curved isoquants
b. substitutes in production do not have isoquants
c. straight-line isoquants
d. L-shaped isoquants

Answer 2

c.

Question 3

The cost minimizing combination of inputs can be found at:

a. the tangency point of the isoquant and the isocost line
b. the tangency point of the isoquant and the horizontal axis
c. the tangency point of the isoquant and the vertical axis
d. not enough information to know the

Answer 3

a.

Question 4

Perfect complements are:

a. not used in production
b. nice things to say to another person
c. used together in production
d. used either/or in production

Answer 4

c.

Question 5

An isoquant is defined in economics as a line indicating all combinations of two variable inputs that will produce:

a. an increasing level of output
b. an increasing level of input
c. the same level of output
d. the same level of input

Answer 5

c.

Question 6

If an isoquant intersects an isocost line at two points, a manager can surmise that:

a. there is a lower isocost line where the isoquant will intersect at only one point
b. no least-cost combination is possible
c. there are two choices of least-cost input combinations
d. none of the other three answers

Answer 6

a.

Question 7

Agricultural firms will adjust the level of input use based on:

a. changes in the absolute prices
b. changes in relative prices
c. increases in general inflation
d. management decisions based on inside information

Answer 7

b.

Question 8

To determine the profit-maximizing level of production with two inputs, the manager must know:

a. the marginal rate of technical substitution
b. the slope of the relevant isoquant line
c. the slope of the relevant isocost line
d. the marginal rate of technical substitution and the price ratio

Answer 8

d.

Question 9

The traditional convex isoquant that is associated with agricultural production processes gets its shape from:

a. constant substitutability of inputs
b. the diminishing returns in the production function
c. cost minimizing behavior of the firm
d. the complementarity of the production surface

Answer 9

b.

Question 10

A manager can minimize production costs by operating at a point where:

a. the isoquant is tangent to the isocost line
b. the isoquant is equal to zero
c. the isoquant is tangent to the origin
d. not enough information to know

Answer 10

a.

Question 11

Perfect substitutability of inputs is:

a. the most common relationship between inputs in agribusiness firms
b. the least common relationship between inputs in agribusiness firms
c. possible in agribusiness firms, but not common
d. the only possibility for inputs in agribusiness firms

Answer 11

c.

Question 12

An isoquant that is convex to the origin and negatively sloped depicts:

a. imperfect substitutability
b. constant substitutability
c. perfect substitutability
d. none of the other three answers

Answer 12

a.

Question 13

Efficient use of two inputs in the production process will depend on:

a. prices of both inputs
b. scarcity
c. prices and productivity of both inputs
d. productivity of both inputs

Answer 13

c.

Question 14

The marginal rate of technical substitution between two inputs in a single production process describes:

a. the only combination of inputs that will produce a profit
b. every combination of inputs that will produce a profit
c. several combinations of inputs that will produce a profit
d. none of the other three answers

Answer 14

d.

Question 15

Managers of agribusiness firms can substitute inputs in the production process to maintain output:

a. only as long as short run profits are high
b. both in the short run and the long run
c. only in the long run
d. only in the short run

Answer 15

b.

Question 16

For US agriculture, labor may be substituted for capital in production, but labor:

a. cannot be substituted for land
b. cannot be substituted for chemical inputs
c. cannot be substituted for machinery
d. none of the above

Answer 16

d.

Question 17

Two isoquants can never:

a. intersect
b. be L-shaped
c. be positive
d. be negative

Answer 17

a.

Question 18

Which equation best represents an isoquant?

a. Y = f (A / K, L, M)
b. Y1, Y2, = f (. / A, K, L, M)
c. Y = f (A, K, / L, M)
d. Y = f (A, K, L, M)

Answer 18

c.

Question 19

In the graph of an isoquant, there are:

a. inputs on both axes
b. input on the x-axis, and output on the y-axis
c. output on both axes
d. output on the x-axis, and input on the y-axis

Answer 19

a.

Question 20

An isoquant is:

a. all combinations of two inputs that produce the same level of output
b. all combinations of two outputs that produce the same level of input
c. all combinations of two inputs that can be purchased at the same cost
d. all combinations of two outputs that can be produced with fixed inputs

Answer 20

a.

Question 21

An isoquant demonstrates that:

a. a large number of combinations of inputs can produce the same level output
b. a large number of output combinations can be produced with the same level of inputs
c. costs of production remain constant at all levels of output
d. revenues remain constant at all levels of output

Answer 21

a.

Question 22

Research at agricultural universities results in:

a. more labor-intensive production prices in agriculture
b. more capital-intensive production practices in agriculture
c. no charge in the optimal combinations of labor and machinery
d. more family farms in the US

Answer 22

b.

Question 23

In Sub-Saharan Africa, the choice of labor over machines is due to:

a. low income levels
b. lack of technical knowledge
c. political factors beyond the ability of farmers to change
d. relative prices

Answer 23

d.

Question 24

Coke and Pepsi will purchase sucrose or fructose based on:

a. sales revenue
b. relative prices
c. technology of soft drink production
d. the PPF

Answer 24

b.

Question 25

Computers and computer operators are:

a. substitutes in the production of databases
b. complements in the production of databases
c. profit-maximizing inputs for all high-technology firms
d. cost-minimizing inputs for all high-technology firms

Answer 25

b.

Question 26

A typical isoquant is:

a. convex to the origin, reflecting imperfect substitutes
b. concave to the origin, reflecting imperfect substitutes
c. convex to the origin, reflecting perfect substitutes
d. concave to the origin, reflecting perfect substitutes

Answer 26

a.

Question 27

An isoquant shape is derived from:

a. the Law of Diminishing Marginal Returns
b. scarcity
c. profit maximization
c. decisions on which inputs to buy

Answer 27

a.

Question 28

The slope of the isoquant is:

a. the price ratio
b. the marginal rate of production substitution
c. the marginal rate of technical substitution
d. the law of diminishing returns

Answer 28

c.

Question 29

In equilibrium:

a. the slope of the isoquant is equal to the slope of the isocost line:
b. the MRTS = price ratio
c. the cost-minimizing combinations of inputs is purchased
d. all of the other three answers

Answer 29

d.

Question 30

If the price of the input on the horizontal axis (X1) increases, then:

a. the slope of the isocost line will become steeper
b. the slope of the isocost line will become less steep
c. the slope of the isoquant will become steeper
d. the slope of the isoquant will become less steep

Answer 30

a.

Question 31

A business firm will chose which outputs to produce based on:

a. relative prices
b. absolute prices
c. utility maximization
d. not enough information to answer

Answer 31

a.

Question 32

The massive substitution of capital labor in US agriculture since World War II is due to:

a. electrification of rural areas
b. relative prices
c. marginal decision making
d. an overreliance on technology in production agriculture

Answer 32

b.

Question 33

To find the profit-maximizing input combination, a firm should:

a. set the slope of the isorevenue line equal to the slope of the isoquant
b. set the slope of the isocost line equal to the slope of the isoquant
c. continue what has been done in the past
d. adopt new technology

Answer 33

b.

Question 34

In the past several years, US agricultural producers have switched a large number of acres out of wheat and planted it to corn and soybeans. This substitution is due to:

a. large agribusiness corporations
b. relative prices
c. global warming
d. adoption of new environmental practices

Answer 34

b.

Question 35

Tractors and plows are:

a. compliments in production
b. substitutes in production
c. neither complements nor substitutes in production
d. either complements and substitutes in production, depending on the situation

Answer 35

a.

Question 36

Nuts and bolts are:

a. substitutes in production
b. complements in production
c. neither complements nor substitutes in production
d. either complements and substitutes in production, depending on the situation

Answer 36

b.

Question 37

Labor and agrochemicals are:

a. complements in production
b. substitutes in production
c. neither complements nor substitutes in production
d. both complements and substitutes in production

Answer 37

d.

Question 38

Hired labor and farm operators are:

a. complements in production
b. substitutes in production
c. neither complements nor substitution in production
d. both complements and substitutes in production

Answer 38

d.

Question 39

Perfect complements:

a. do not exist in the real world
b. are used together
c. are used separately, one or the other
d. not enough information to answer

Answer 39

b.

Question 40

Perfect substitutes:

a. do not exist in the real world
b. are used together
c. are used separately, one or the other
d. not enough information to answer

Answer 40

c.

Question 41

Isoquants increase in the level of output:

a. left to right
b. low to high
c. both a. and b.
d. neither a. nor b.

Answer 41

c.

Question 42

An isoquant cannot:

a. be upward sloping
b. be downward sloping
c. be vertical
d. be horizontal

Answer 42

a.

Question 43

The choice of techniques depends on:

a. managerial skill
b. relative prices
c. technology available
d. none of the other answers

Answer 43

b.

Question 44

Ag policy in the US has subsidized agricultural producers since:

a. 1880
b. 1921
c. 1933
d. 1985

Answer 44

c.

Question 45

MRTS is equal to (^ is the delta sign)

a. ^X1 / ^X2
b. ^X2 / ^X1
c. ^Y / ^X
d. ^X / ^Y

Answer 45

b.

Question 46

The isocost line:

a. is another name for an isoquant
b. has the same slope as the isoquant at all points
c. has the same slope as the isoquant in equilibrium
d. has a slope of MRTS

Answer 46

c.

Question 47

Equilibrium is:

a. ceteris paribus
b. sanity; balance
c. a point where there is no tendency to change
d. does not change when relative prices change

Answer 47

c.

Question 48

If the price of land increases, ceteris paribus, producers will:

a. find substitutes for land, when possible
b. keep doing the same thing
c. use more land, since it is more valuable
d. use more land, since banks will extend more credit

Answer 48

a.

Question 49

Labor-intensive production techniques are most likely to be found in:

a. high-income nations
b. middle-income nations
c. low-income nations
d. oil producing nations

Answer 49

c.

Question 50

Capital-intensive production techniques are most likely to be found in:

a. high-income nations
b. middle-income nations
c. low-income nations
d. oil producing nations

Answer 50

a.