production

Question 1

what is capital

Answer 1

long lved inputs such as land machinery

Question 2

what is labour

Answer 2

workers/their hours worked

Question 3

what is the production function and what does it represent

Answer 3

Q = f(L,K)
the maximum amount of quantity produced by given inputs

Question 4

what inputs are fixed and variable in the SR

Answer 4

F: capital (K)
V: labour (L)

Question 5

what inputs are fixed in the LR

Answer 5

none, all are variable

Question 6

define MPL

Answer 6

How much will one extra worker increase output

Question 7

What is the formula for MPL

Answer 7

DQ/DL

Question 8

at what point does MPL = APL

Answer 8

at APL maximum point

Question 9

APL formula

Answer 9

APL = Q/L

Question 10

define APL

Answer 10

the average output each worker produces

Question 11

what does an isoquant line represent

Answer 11

the combos of L/K that produce the same output

Question 12

what are 2 rules of isoquants

Answer 12

they never cross, they always slope downwards

Question 13

what does the slope of an isoquant represent

Answer 13

ability to replace one unit of input with another with Q remaining constant

Question 14

what is the equation for the slope of an isoquant

Answer 14

MRTS = DK/DL

Question 15

define diminishing marginal rates of technical substitution

Answer 15

• the more labour compared to capital a firm has the harder it is to replace capital with labour

Question 16

give another way to define MRTS

Answer 16

MRTS = -MPL/MPK

Question 17

what is the cobb douglas function

Answer 17

q= AL^aK^b

Question 18

what is the MPL of the cobb douglas function

Answer 18

MPL = aq/L = a x APL

Question 19

what is the MPK of the douglas cobb function

Answer 19

MPK = bq/K = b x APK

Question 20

what can MRTS equate to in relation to the cobb doug function

Answer 20

MRTS = -aq/L/bq/K

Question 21

what is the proof for constant decreasing and increasing returns to scale

Answer 21

q2 = A(2L)^a(2K)^b
=2^a+b AL^aK^b
= 2^a+b x q1
g = a+b
q2 = 2^g x q1
if g = 1 constant returns to scale etc