Chapter10

Question 1

what is a firms goal

Answer 1

maximize profit

Question 2

short run

Answer 2

the time frame in which the quantity of one or more inputs used in production is fixed

Question 3

long run

Answer 3

the time frame in which the quantities of all resources, including capital can be varied

Question 4

Production function

Answer 4

= factors of production (capital, labour) in short run one factor is fixed, capital is usually fixed

and in short run to increase capital you must increase labour as capital is fixed

Question 5

sunk cost

Answer 5

the past expenditure on a plant that has no resale value

Question 6

the relationship between output and the quantity of labour employed by using three related concepts

Answer 6

total product

marginal product

average product

Question 7

diminishing marginal return

Answer 7

tendency for the marginal product of an additional unit of a factor of production to be less that the marginal product of the previous unit of the factor

Question 8

increasing marginal return

Answer 8

increasing marginal returns occur when the marginal product of an additional worker exceeds the marginal product of the previous worker

Question 9

law of diminishing return

Answer 9

as a firm uses more of a variable factor of production with a given quantity of a fixed factor of production, the marginal product of the variable factor of production eventually diminishing