1. The decline in marginal productivity experienced when input usage increases, holding all other inputs constant, is known as:
- The law of diminishing marginal labor.
- The law of diminishing marginal returns.
- The law of diminishing marginal utility.
- The law of diminishing marginal rate of technical substitution.
2. A property of a production function stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output, is known as:
- The law of diminishing marginal labor.
- The law of diminishing marginal returns.
- The law of diminishing marginal utility.
- The law of diminshing marginal rate of technical substitution.
3. Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is PX = 40 - 5QX; Consumer 2's (inverse) demand is PX = 10 - QX; and Consumer 3's (inverse) demand is PX = 30 - 2QX. When PX = $5, the market will demand:
- 15.5 units.
- -12 units.
- 24.5 units.
- None of the statements is correct.
4. The difference between a price increase and a decrease in income is that:
- a decrease in income does not affect the slope of the budget line, while an increase in price does change the slope.
- a price increase does not affect the consumption of other goods, while a decrease in income does.
- a price increase will increase real income, while a decrease in income will increase real income.
- None of the statements is correct.