"Chapter 7 exam questions"
Chap. 7-1 CHAPTER 7 SAMPLE TEST QUESTIONS - MULTIPLE CHOICE 1. If the marginal physical product is decreasing with additional input, marginal value product will be a. increasing b. decreasing c. constant d. decreasing and equal to MPP 2. In Stage III of a production function, marginal physical product will be a. increasing b. decreasing c. negative d. equal to zero 3. The relationship between input and output in a production function is shown in a. the appropriate physical units b. terms of total cost and total revenue c. terms of total input cost and total value product d. price of input and price of output 4. The equation for computing marginal cost is a. total cost divided by output b. total cost divided by input c. change in total cost divided by change in input d. change in total cost divided by change in output 5. If a farmer is producing at some point where MR is greater than MC and input is not limited a. profit is not being maximized b. more input should be used to maximize profit c. more output should be produced to maximize profit d. all of the above 6. If MPP is less than APP, then APP a. is decreasing b. is increasing c. is constant d. may be doing any of the above 7. If the price of the input decreases, a profit maximizing farmer should a. use more input and produce more output b. use more input and produce less output Chap. 7-2 c. use less input and produce more output d. use less input and produce less output 8. The Equal Marginal Principal should be used whenever a. input prices are high b. output prices are low c. there are a limited input and several alternative uses for it d. a farmer wishes to maximize production from several different enterprises 9. A diminishing marginal physical product occurs because of a. decreasing output prices b. increasing input prices c. decreasing input prices d. limits on physical or biological response to increased input levels 10. Profit is maximized somewhere in the range where a marginal physical product is a. decreasing but still positive b. increasing but positive c. constant d. negative SAMPLE TEST QUESTIONS - TRUE/FALSE T F 1. Profit will increase any time more input is used. T F 2. As a general rule, if the price of the output increases, you should use more input to maximize profit. T F 3. If MPP is increasing, MVP will also be increasing. T F 4. Marginal cost is equal to the input price as long as that price is constant. T F 5. When the equal marginal principle is used correctly, the final MVP for each alternative will all equal each other and all be greater than or equal to MIC. T F 6. The Law of Diminishing Returns requires at least one fixed input for it to be in effect. T F 7. If MVP is less than MIC, there is a negative profit. Chap. 7-3 T F 8. Doubling both input and output price will not change the profit maximizing input and output levels. T F 9. Average physical product will continually increase as more input is used. T F 10. Marginal cost is equal to the change in total cost divided by the change in input. T F 11. Average physical product is always decreasing in Stage II. T F 12. If output price is equal to the minimum AVC, producers should produce and will have a zero profit. T F 13. Profit is maximized somewhere in Stage III of a production function. T F 14. Average physical product will equal marginal physical at the point where profit is maximized. T F 15. If MPP is increasing, MVP will be increasing. T F 16. Marginal cost will eventually decrease as more output is produced.