Be 313: Managerial Economics Exercise On Theory of Producer

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Date/Class Schedule: ___________________________ Score: _____________________
BE 313: MANAGERIAL ECONOMICS

EXERCISE ON THEORY OF PRODUCER
1. Table below gives the total monthly output of golf carts attainable for varying amounts
of labor for a given scale of plant.
Labor Output Marginal Average Labor Output Marginal Average
(workers (units/ Product Product (workers (units/ Product Product
/month) month) /month) month)
0 0 5 17
1 1 6 20
2 3 7 22
3 6 8 22
4 12 9 20
a. Complete the marginal product and average product columns. Note that marginal
product figures be entered midway between successive output figures.
b. Draw a graph of the total product curve.
c. Draw a graph of the marginal product and average product.
d. Determine the rage of labor that show the three stages of production
e. Indicate the level of employment at which the law of diminishing returns first occurs.
f. Suppose the market price of the output P10,000 and the wage rate is P340, how many
workers would this firm hire? What if the market price decreases to P8,000?
g. Suppose the market price increases to P12,000, what is the highest wage rate the firm
would be willing to pay to employ 6 units of labor?
2. Miko Langot has found out that the production function for gathering coconut is given by:
𝑦 = 10√𝐿
where y is the number of coconuts gathered per week and L is the number of hours per
week that Gabino Ang spends gathering coconuts.
a. If Miko Langot pays Gabino Ang PhP10 per hour, calculate his total and average cost
curve.
b. Graph Langot’s average cost curve. What will the associated marginal cost curve look
like?
MULTIPLE CHOICE
3. In a relationship among total, average and marginal products, where TP is maximized:
a. AP is maximized b. AP is equal to zero c. MP is maximized d. MP is equal to zero
4. In a production process, an excessive amount of the variable input relative to the fixed
input is being used to produce the desired output. This statement is true for:
a. stage II b. stages I and II c. when Ep = 1 d. stage III
5. Marginal revenue product is:
a. defined as the amount that an additional unit of the variable input adds to the total
revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue
resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product
resulting from the increase in output obtained
d. a and b
6. Total output is maximized when:
a. average product equals zero.
b. marginal product is maximized.
c. average product is maximized.
d. marginal product equals zero.
7. If tripling the quantities of all inputs employed doubles the quantity of output produced,
the output elasticity:
a. equals one.
b. is greater than one.
c. cannot be determined without further information.
d. is less than one.
8. The output effect of a proportional increase in all inputs is called:

a. returns to scale.
b. returns to a factor.
c. total product.
d. marginal product.
9. Which of the following indicate when Stage I ends and Stage II begins in the short-run
production?
a. when AP = 0 c. when MP = 0
b. when MP = AP d. when MP starts to diminish
10. Which of the following statements about the short-run production function is true?
a. MP always equals AP at the maximum point of MP.
b. MP always equals zero when TP is at its maximum point.
c. TP starts to decline at the point of diminishing returns.
d. When MP diminishes, AP is at its minimum point.
11. Assume a firm employs 10 workers and pays each 15 per hour. Further assume that the
MP of the 10th worker is 5 units of output and that the price of the output is 4.
According to economic theory, in the short run,
a. the firm should hire additional workers.
b. the firm should reduce the number of workers employed.
c. the firm should continue to employ 10 workers.
d. more information is required to answer this question.
END
“There should be no boundary to human endeavor just as wide as the universe. Even if life may seem so bad,
there is always something that you can do and succeed at. While there is life, there is HOPE.” ~ S. Hawkings
“At the end of every end is always a new beginning. Every beginning is a way to end. BOTH are thrilling, both
are terrifying, but both, and all events that happens in between, are life’s MYSTERY.”
“Some lessons are best learned through pain. Sometimes our visions clear only after our eyes are washed with
tears. Sometimes we have to be broken to be whole again. If God meant the day to be perfect, He wouldn't
have invented tomorrow. So no worries if today wasn't perfect, because there is still tomorrow.”

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Name:__________________ Course:

Date/Class Schedule: _______ Score: _

BE 313: MANAGERIAL ECONOMICS

8. The output effect of a proportional increase in all inputs is called:

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