7.2 Production, Costs, and Profits

Question 1

Name the 4 types of inputs for firms

Answer 1

1-intermediate products (Inputs that are outputs from some other firm)
2-Inputs provided directly by nature
3-Inputs that are the services of labour
4-Inputs that are the services of physical capital

Question 2

define what is a production function?

Answer 2

The production function shows the maximum output that can be produced by a combination of inputs

Question 3

What are accounting profits?

Answer 3

Accounting profits = Revenues – Explicit Costs

Question 4

What is Economic profit?

Answer 4

Economic profit = Revenues – (Explicit costs +Implicit costs) or
Economic profit = Accounting profits – Implicit costs

Question 5

Define the short run for Decision Making?

Answer 5

The short run is a time period in which the quantity of some inputs, called fixed factors, cannot be changed (ex: land, the services of management, or even the supply of skilled labour).

Question 6

Define the long run for Decision Making?

Answer 6

The long run is the length of time over which all of the firm’s factors of production can be varied, but its technology is fixed.

Question 7

Define the very long run for Decision Making?

Answer 7

The very long run is the length of time over which all the firm’s factors of production
and its technology can be varied.