Production

Question 1

Isoquant

Answer 1

Q-isoquant of f is the set of all input (x,y) with which the firm produces q units of output
{(x,y)|f(x,y)=q}

Question 2

Fixed cost

Answer 2

1One-off costs necessary for the firm to operate for example searching for an appropriate location legal costs et cetera
2Factors which are not permanently fixed but have to be fixed for a while
Startup capital machinery
Cannot be adjusted quickly
Analyse the reaction of demand before increasing that factor

Question 3

LRAC

Answer 3

The cost curve u get by adjusting inputs optimally. That is, for any given level of output q, choose the one that min cost of producing that level

Question 4

Competitive market

Answer 4

One in which every indi’s demand or Supply decisions cannot change the prices of the goods bought and sold

Question 5

What does that mean by making zero economic profits

Answer 5

The firm is making money but all the money that it makes is being paid out to purchase the inputs that it uses
Each factor of production is earning the same amount in this industry that could have occurred elsewhere so there are no extra profits to attract new factors of production to this industry I.e. it is not earning a surplus over what otherwise it will be doing

Question 6

Mature industry

Answer 6

One characteristic is free entry so the new entrants replicate incumbents production technology and enter the market as long as there are profits to be made. as a result the profit will be driven to 0

Question 7

Economic rents

Answer 7

Payments to a factor of production that are in excess of the minimum payment necessary to have that factor supplied
The cost of production of the landing slot is zero. But since they are in limited supply they have a value

Question 8

Who affects input price

Answer 8

Monopsony

Question 9

How does mono affects price of output?

Answer 9

Choose supply and accept price on demand curve

Question 10

Rent seeking

Answer 10

Efforts directed at acquiring claims to factors in fixed supplies. Deadweight loss Because they don’t create any more output they just change the market value of existing factors of production

Question 11

How do You derived the MC

Answer 11

Choose Q to maximise profit

Question 12

Diff between Marginal rate of transformation and technical rate of substitution

Answer 12

MRT=MPLy/MPLx

TRS=MP1/MP2=w1/w2

Question 13

Producer surplus, Three ways to demonstrate

Answer 13

Revenue minus variable cost
The area of above MC
The area to the left of MC

Question 14

Supply

Answer 14

Upward sloping part of MC and above AVC