Chapter 34

Question 1

Rewards for factors of production:
Land
Labour
Enterprise
Capital

Answer 1

Rent
Wages
Profit
Interest

Question 2

Isoquant curve

Answer 2

The line that shows the same quantity of output is produced but with different quantities of 2/more inputs.

Question 3

Short run

Answer 3

Time when only some factors of production can be changed

Question 4

Total output/product

Answer 4

Total unit of goods and services produced.

Question 5

Marginal product

Answer 5

The units of goods and services produced after producing one more unit of factor of production.

Question 6

To maximise profit, firms need to?

Answer 6

Maximise the difference between their total revenue and total cost.

Question 7

Fixed costs

Answer 7

Costs that are independant from output (rent).

Question 8

Variable costs

Answer 8

Costs that are affected by the amount of output (raw materials, labour, etc.)

Question 9

Long run

Answer 9

Time when all factors of production are variable therefore firms can mix them to achieve efficiency.

Question 10

What is the difference between increasing return and decreasing return to scale

Answer 10

percentage increasing return to scale is when output is more than the precentage factors of production indicating that it is more efficient. AND VICE VERSA.

Question 11

When isocost lines and isoquant curves touch iss…

Answer 11

When it is the most efficient.

Question 12

Why is the long-run production function analysis highly theoretical?

Answer 12

• Hard to determine a firms isoquant curve
• Assumes it is quite easy to switch factors of production in the long run
• Employers might be reluctant to switch between labour to capital intensive production.