Production: Cost and Profit FINALS

Question 1

Relates the output of a production process to the necessary inputs.

Answer 1

Production Function

Question 2

The increase in output that arises from an additional unit of input

Answer 2

Marginal Product

Question 3

The properly whereby the marginal product of an input declines as the quantity of the input increases

Answer 3

Diminishing Marginal Product

Question 4

Represent the various combinations of two inputs

Answer 4

Isoquants

Question 5

Contains all combinations of inputs that the same budget can purchase at constant prices.

Answer 5

Isocost line

Question 6

(T/F) If marginal COST is greater than marginal REVENUE, the firm should INCREASE its output

Answer 6

FALSE

Question 6

(T/F) If marginal REVENUE is greater than marginal COST, the firm should INCREASE its output

Answer 6

TRUE

Question 6

(T/F) At the profit-maximizing level of output, marginal revenue and marginal cost are not equal

Answer 6

FALSE

Question 7

An output at which a firm makes a normal profit but not an economic profit.

Answer 7

Breakeven Point