Production Function

Question 1

The production function

Answer 1

Shows the relationship between output and the different levels and combinations of factor inputs (CELL)

Question 2

SR production function

Answer 2

At least one factor input is fixed in supply

Question 3

Law of diminishing returns

Answer 3

• Initially output will increase as more labour is used
• There will be an optimal level of production
• Eventually as more workers are employed total output will begin to fall

Question 4

Total product

Answer 4

Output by a given number of inputs over a POT

Question 5

Average product

Answer 5

Output per unit of input

Question 6

Marginal product

Answer 6

Addition to output produced by an extra unit of input

Question 7

When marginal output is 0

Answer 7

Total produced is at its optimal point

Question 8

DMR and DAR

Answer 8

DMR sets in before DAR

Question 9

LR Production function

Answer 9

The period of time taken to vary all factors of production

Question 10

Increasing returns to scale

Answer 10

Firm x2 inputs and x3 outputs

Question 11

Constant returns to scale

Answer 11

X2 in inputs, X2 in outputs

Question 12

Decreasing RTS

Answer 12

Firm x2 inputs, x1.5 outputs