Production

Question 1

What happens to factors of production in short run and long run?

Answer 1

Short run - At least one factor of production is fixed and cannot be varies

Long run - All factors of production are varied.

Question 2

Total Product definition

Answer 2

The Quantity of output produced by a single number of inputs over a period of time

Input - What are used to produce products (every fop)

Question 3

Average Product definition and equation

Answer 3

The Quantity of output per unit of input

AP = TP/Level of Variable input

Question 4

Marginal Product definition and equation

Answer 4

The addition to output produced by an extra unit of input

MP = (Change in TP) / (Change in input)

Question 5

Law of Diminishing Returns

Answer 5

As increasing quantities of a variable input are combined with a fixed input, eventually the marginal product and then average product will decline.

Question 6

Returns to Scale

Answer 6

Increasing returns to scale - Occur is a percentage increase in inputs to production leads to a more than proportional increase in output.

Constant returns to scale - Occur is a percentage increase in inputs to production leads to the same percentage increase in output.

Decreasing returns to scale - Occur if a percentage increase in inputs to production leads to a less than proportional increase in output.