Lecture 1

Question 1

3 presumed properties of the production function:

Answer 1

1. output is nondecreasing with input (i.e. marginal product is non-negative)
2. Law of Diminishing marginal returns
3. No free lunch (origin must be set at x=0,y=0)

Question 2

Local maxima/local minima

Answer 2

Where a parabola hits a peak or valley,

Question 3

Global maxima/minima

Answer 3

Highest of lowest point in function

Question 4

The production function:

Answer 4

a single-factor production function represents the technical relationship between outputs, inputs, total product, marginal product, and average product

Question 5

Total product

Answer 5

Amount of output

Question 6

Average product:

Answer 6

average value of output for given units of input; or ratio of output to input

Question 7

Marginal product:

Answer 7

Amount of output gained for increasing input by one unit

Question 8

Factor elasticity:

Answer 8

% change in output/%change in input

Question 9

The three stage production function:

Answer 9

Stage 1: elasticity is greater than 1
Stage 2: elasticity is greater than 0, but less than one
Stage 3: elasticity is less than 0