TOPIC 5 (WEEK 6)
PRODUCTION TECHNIQUES
MICROECONOMICS (ECMB223)
PART A: MULTIPLE CHOICE QUESTIONS
1. The slope of the total product curve is the
a. average product.
b. slope of a line from the origin to the point.
c. marginal product.
d. marginal rate of technical substitution.
2. The law of diminishing returns refers to diminishing
a. total returns.
b. marginal returns.
c. average returns.
d. all of these.
3. When labor usage is at 12 units, output is 36 units. From this we may infer that
a. the marginal product of labor is 3.
b. the total product of labor is 1/3.
c. the average product of labor is 3.
d. none of the above.
4. The marginal product of an input is
a. total product divided by the amount of the input used to produce this amount of output.
b. the addition to total output that adds nothing to total revenue.
c. the addition to total output that adds nothing to profit.
d. the addition to total output due to the addition of one unit of all other inputs.
e. the addition to total output due to the addition of the last unit of an input, holding all other inputs
constant.
5. When the average product is decreasing, marginal product
a. equals average product.
b. is increasing.
c. exceeds average product.
d. is decreasing.
e. is less than average product.
6. In a production process, all inputs are increased by 10%; but output increases less than 10%. This
means that the firm experiences
a. decreasing returns to scale.
b. constant returns to scale.
c. increasing returns to scale.
d. negative returns to scale.
1
Figure 5.1
7. Refer to Figure 5.1. The situation pictured is one of
a. constant returns to scale, because the line through the origin is linear.
b. decreasing returns to scale, because the isoquants are convex.
c. decreasing returns to scale, because doubling inputs results in less than double the amount of
output.
d. increasing returns to scale, because the isoquants are convex.
e. increasing returns to scale, because doubling inputs results in more than double the amount of
output.
PART B: SHORT QUESTIONS
1. What is a production function? How does a long-run production function differ from a short-run
production function?
2. Why does production eventually experience diminishing marginal returns to labor in the short run?
3. The marginal product of labor in the production of computer chips is 50 chips per hour. The marginal
rate of technical substitution of hours of labor for hours of machine capital is 1/4. What is the marginal
product of capital?
4. Suppose a chair manufacturer is producing in the short run (with its existing plant and equipment). The
manufacturer has observed the following levels of production corresponding to different numbers of
workers:
2
a) Calculate the marginal and average product of labor for this production function.
b) Does this production function exhibit diminishing returns to labor? Explain.
c) Explain intuitively what might cause the marginal product of labor to become negative.
5. Do the following functions exhibit increasing, constant, or decreasing returns to scale?
a) Q=3L+2K
b) Q=(2L+2K)1/2
c) Q=3LK2
PART C: PAST YEAR EXAM QUESTIONS
Final Examination 1 2023/2024
Mustaqeem manages a factory that manufactures flowerpots. In the short run, Mustaqeem observed that
while number of machines (K) needed remain unchanged, as more workers (L) are added, number of
flowerpots produced will also change. Specifically, if number of workers increases from 1 to 5, number of
flowerpots produced changes as follows:10, 22, 30, 36, 40.
Required:
(a) Calculate the marginal and average product of labor for the factory’s production function observed
by Mustaqeem.
[10 marks]
(b) Determine whether this factory’s production function is exhibiting a diminishing return to labor.
Provide rationale to your answer.
[4 marks]
(c) In the long run, assume this factory has the following production functions. For each production
function, illustrate whether the factory is facing constant, increasing or decreasing return to scale.
(i) Q = 0.25KL [4
marks]
(ii) Q = (4K + 4L)0.5 [4 marks]
(d) Briefly explain to Mustaqeem criteria that determine whether an input is fixed or variable.
[3 marks]
Final Examination 2 2023/2024
3
Mustafa is a manufacturer that relies on both labours and machines to produce his main product, table
lamp. Mustafa observes the following level of production corresponding to the number of workers that he
uses:
Number of Labour Number of Table Lamp
0 0
1 12
2 22
3 30
4 36
5 40
6 36
7 32
Required:
a) Calculate the marginal AND average product of labour for EACH level of production observed
above.
[14 marks]
b) Explain the possible reason that could lead to negative marginal product of labour for Mustafa’s
production function.
[3 marks]
c) Assuming, in the case of Mustafa’s production function, the marginal rate of technical
substitution of labor for machine is calculated as 1/2. Briefly describe what does it means by this.
[2 marks]
d) In a long run, the productivity level of Mustafa’s inputs i.e. labour and machine can be measured
using return to scale. Describe, with example, the THREE (3) stages of return to scale.
[6 marks]
