Man Ec: #4 Flashcards
The theory of production is concerned with the way in which ________ _________ are employed to produce a firms products.
physical resources 65
What type of function describes the relationship between the inputs to production and the resulting outputs?
a production function
What is a production function? What can it tell you?
It is a descriptive statement that relates inputs to outputs. It can tell you things like the maximum output that can be produced from a certain number of inputs.
What factor determines the actual production function?
where technology is at
The production function describes what is feasible for a firm when operating _______.
efficiently. This describes the most efficient ways to do things to get the most out of it.
I love Heidi
Thanks for helping me study.
Put the following into a production function. What does it mean? Q=output K=capital L=labor
Q=f(K,L) It means that the quantity of output depends on the quantity of the two inputs K & L
What does the short term refer to?
a period of time in which one or more factors of production cannot be changed. for example the capital in an automobile plant cannot be changed in the short run since it takes years to build a new plant.
Factors that cant be changed in the short run (such as the automobile plant) are called what?
fixed factors
The output of variable and fixed inputs will be the total product. In other words what is total product?
This is the concept used to describe the relationship between outputs and variations in only one input in a production function. 66
What is the marginal product? How is it calculated?
-It is the change in total product resulting from the use of one more unit of the variable factor. -Marginal Product= Change in Output/ Change in Input 67
How do you calculate average product?
Average Product= total product / # of units of input
Marginal Product is like a magnet that pulls average product either up or down depending on if MP is greater or less than AP
As well if TP is positive then MP is positive https://www.youtube.com/watch?v=0Wnp4wQkR0o
Total product is increasing most rapidly when marginal product is ________.
increasing
When marginal product is greater than average product of labor it pulls average labor ________.
up
What does the law of diminishing returns state?
That at some point one more unit of variable cost will add less to total product then the previous.
As more workers are added to the mix they can split up tasks into separate jobs with people specializing in one job. What is this called?
division of labor
Costs that are forgone by not putting a firms resources to its highest use, for example not renting out a house but living in it instead, is called…
opportunity cost 69
what is the “opportunity cost of risk”?
This is the rate of return that one could earn by investing in a different project with similar risk.
What type of cost does not change with output? Which does?
Fixed doesn’t Variable does.
What is average total cost? What are the equations for average total cost average fixed cost average variable cost
the total cost of production at any level of output divided by the number of units produced. ATC=TC/Q AFC=FC/Q AVC=VC/Q
What is marginal cost? What is the equation?
the increase in total cost from producing one more unit MC=Change in VC / Change in Q
What are the short run costs?
Average total cost Average fixed cost Average variable cost Marginal Cost
Returns to scale
returns to scale, in economics, the quantitative change in output of a firm or industry resulting from a proportionate increase in all inputs. If the quantity of output rises by a greater proportion—e.g., if output increases by 2.5 times in response to a doubling of all inputs—the production process is said to exhibit increasing returns to scale. Such economies of scale may occur because greater efficiency is obtained as the firm moves from small- to large-scale operations. Decreasing returns to scale occur if the production process becomes less efficient as production is expanded, as when a firm becomes too large to be managed effectively as a single unit.
