Microecon Week 4

Question 1

What is the name of the mathematical relationship between inputs and outputs?

Answer 1

Production function

Question 2

The additional output from adding +1 units of an input, holding other inputs constant is referred to as?

Answer 2

Marginal production

Question 3

The slope of a production function in units of labour is known as?

Answer 3

MPL (Marginal Product of Labour)

Question 4

What is the term given to the amount one input can be reduced when +1 unit of another input is added, holding output constant?

Answer 4

Marginal rate of substitution

Question 5

The rate at which output increases in response to a proportional increase in all inputs is known as?

Answer 5

Returns to scale

Question 6

If inputs increase by a factor of X, output increases by a factor equal to X, what type of returns to scale is this?

Answer 6

Constant returns to scale (CRS)

Question 7

If inputs increase by a factor of X, output increases by a factor greater than X, what type of returns to scale is this?

Answer 7

Increasing returns to scale (IRS)

Question 8

If inputs increase by a factor of X, output increases by a factor less than X, what type of returns to scale is this?

Answer 8

Decreasing returns to scale (DRS)

Question 9

What is the name given to a cost that must be regularly incurred to remain in business, but that do not vary with the level of output?

Answer 9

Fixed costs

Question 10

What is the name given to costs that increase with the quantity produced?

Answer 10

Variable costs

Question 11

What is the name given to a cost that has been incurred in the past that can never be recovered? (and that should not enter into any economic decisions)

Answer 11

Sunk costs