ECON 300 Exam 2 Questions with
Correct Answers 2026 Update
Sole Proprietorships -Correct Answer ✔-Owned by a single individual
Unlimited liability
Partnerships -Correct Answer ✔-The smallest proportion of firm type
Shared liability
Corporations -Correct Answer ✔-Owned by shareholders
Limited liability
Economists assume that firm owners want to maximize
_______.
Profit is the difference between _______ and _______. -Correct Answer ✔-profit;
revenue; cost
To maximize profits, a firm must produce as efficiently as possible. A firm engages in
efficient production if:
A. given the quantity of inputs, cannot produce more output.
B. it is maximizing profit.
C. it cannot produce its current level of output with fewer inputs.
,D. All of the above. -Correct Answer ✔-D
Efficient production is also known as:
A. social efficiency.
B. average efficiency.
C. technological efficiency.
D. marginal efficiency. -Correct Answer ✔-D
The production function is a relationship between
A. inputs and outputs.
B. inputs and cost.
C. cost and output.
D. fixed and variable inputs. -Correct Answer ✔-A
In the short-run,
A. all inputs are variable.
B. all inputs are fixed.
C. the product is fixed.
D. one or several inputs are fixed. -Correct Answer ✔-D
,The distinction between the short- and long-run is made in terms of
A. the variation in the product.
B. chronological time.
C. the ability to change the factors of production.
D. the phase of the product cycle. -Correct Answer ✔-C
The period it takes for all inputs to be varied, that is, the long-run period, is ______ for
different types of firms. -Correct Answer ✔-different
The difference between a fixed and a variable input is that a
A. fixed input cannot practically vary in the short run and a variable input can easily vary
during the relevant period.
B. variable input can be changed in the long run and a fixed input can only be changed in
the short run.
C. fixed input changes and a variable input does not.
D. None of the above. -Correct Answer ✔-A
The production function for a firm that uses only labor and capital shows
A. the maximum amount of output that can be produced from given levels of labor and
capital.
, B. the maximum amount of input that can be produced from every level of labor and
capital.
C. every amount of output that can be produced from given levels of labor and capital.
D. every amount of output that can be produced from every level of labor and capital. -
Correct Answer ✔-A
You observe that MPL > APL and MPL is decreasing but positive as more labor input is
used.
Output must be _____ at a _____ rate and average productivity 'APL' must be _____ -
Correct Answer ✔-increasing; decreasing; increasing
You observe that MPL < APL and MPL is decreasing but positive as more labor input is
used.
Output must be _____ at a _____ rate and average productivity 'APL' must be _____ -
Correct Answer ✔-increasing; decreasing; decreasing
The steeper an isoquant is (labor measured on the horizontal axis):
A. the greater is the marginal productivity of labor relative to that of capital.
B. the greater is the need to keep capital and labor in fixed proportions.
C. the greater is the level of output.
D. the greater is the substitutability between capital and labor. -Correct Answer ✔-A
To say that isoquants are convex is to say that:
Correct Answers 2026 Update
Sole Proprietorships -Correct Answer ✔-Owned by a single individual
Unlimited liability
Partnerships -Correct Answer ✔-The smallest proportion of firm type
Shared liability
Corporations -Correct Answer ✔-Owned by shareholders
Limited liability
Economists assume that firm owners want to maximize
_______.
Profit is the difference between _______ and _______. -Correct Answer ✔-profit;
revenue; cost
To maximize profits, a firm must produce as efficiently as possible. A firm engages in
efficient production if:
A. given the quantity of inputs, cannot produce more output.
B. it is maximizing profit.
C. it cannot produce its current level of output with fewer inputs.
,D. All of the above. -Correct Answer ✔-D
Efficient production is also known as:
A. social efficiency.
B. average efficiency.
C. technological efficiency.
D. marginal efficiency. -Correct Answer ✔-D
The production function is a relationship between
A. inputs and outputs.
B. inputs and cost.
C. cost and output.
D. fixed and variable inputs. -Correct Answer ✔-A
In the short-run,
A. all inputs are variable.
B. all inputs are fixed.
C. the product is fixed.
D. one or several inputs are fixed. -Correct Answer ✔-D
,The distinction between the short- and long-run is made in terms of
A. the variation in the product.
B. chronological time.
C. the ability to change the factors of production.
D. the phase of the product cycle. -Correct Answer ✔-C
The period it takes for all inputs to be varied, that is, the long-run period, is ______ for
different types of firms. -Correct Answer ✔-different
The difference between a fixed and a variable input is that a
A. fixed input cannot practically vary in the short run and a variable input can easily vary
during the relevant period.
B. variable input can be changed in the long run and a fixed input can only be changed in
the short run.
C. fixed input changes and a variable input does not.
D. None of the above. -Correct Answer ✔-A
The production function for a firm that uses only labor and capital shows
A. the maximum amount of output that can be produced from given levels of labor and
capital.
, B. the maximum amount of input that can be produced from every level of labor and
capital.
C. every amount of output that can be produced from given levels of labor and capital.
D. every amount of output that can be produced from every level of labor and capital. -
Correct Answer ✔-A
You observe that MPL > APL and MPL is decreasing but positive as more labor input is
used.
Output must be _____ at a _____ rate and average productivity 'APL' must be _____ -
Correct Answer ✔-increasing; decreasing; increasing
You observe that MPL < APL and MPL is decreasing but positive as more labor input is
used.
Output must be _____ at a _____ rate and average productivity 'APL' must be _____ -
Correct Answer ✔-increasing; decreasing; decreasing
The steeper an isoquant is (labor measured on the horizontal axis):
A. the greater is the marginal productivity of labor relative to that of capital.
B. the greater is the need to keep capital and labor in fixed proportions.
C. the greater is the level of output.
D. the greater is the substitutability between capital and labor. -Correct Answer ✔-A
To say that isoquants are convex is to say that:
