term 2 lecture 1 (technology)

Question 1

what is a firm?

Answer 1

a firm is a production unit that has a clear objective ( maximise profits, sales, minimise costs) and a technology and it faces a well defined enviroment: input markets and a output market

Question 2

what is a technology?

Answer 2

a technology is a process by which inputs are converted into outputs.

Question 3

what is a production function?

Answer 3

a description of what maximum output an input bundle can produce

Question 4

what is a production plan?

Answer 4

a production plan is a combination of a quanity of output and a bundle of inputs that can produce that given quantity of output

Question 5

when is a point on the production function technically efficient?

Answer 5

a point on the production function is technically efficient because it gives the highest output that an input bundle can produce

Question 6

what is the production set?

Answer 6

the set of all feasible and efficient production plans

Question 7

in general what is the effect of increasing the input

Answer 7

increasing the input in general should produce more output; the output can remain unchanged but it cannot fall

Question 8

what are the assumptions which make technology well behaved?

Answer 8

assumptions of free disposal (equivaqently feasibility) and weak monotonicity of efficient output make our technology well behaved

Question 9

what is the isoquant for y unit output?

Answer 9

it is the set of all input bundles that yield the same output level y

Question 10

how can isoquants tell us more about the technologt?

Answer 10

you can learn more from about the technology by increasing the number of isoquants

Question 11

how is the marginal rate of technical subsititution represented on an isoquant?

Answer 11

the slope of the isoquant is the marginal rate of technical substitution

Question 12

for imperfect substitutions what must the Technical rate of substitution be doing?

Answer 12

it must be diminishing

Question 13

for perfect substitutes what must the technical rate of substitution be doing?

Answer 13

it must be constant

Question 14

is a convex combination of two indifferent bundles strictly preffered to indifferent bundles?

Answer 14

yes

Question 15

what are diminishing returns to factor?

Answer 15

as you increase the input, the marginal product of that input decreases

Question 16

what is the marginal product of input i?

Answer 16

the marginal product of input i is the rate of change of the output level as the level of input i changes, holding all other input levels fixed

Question 17

what is constant returns to scale?

Answer 17

doubling of the input will double the output

Question 18

what is increasing returns to scale?

Answer 18

doubling the input more than doubles the output

Question 19

what is decreasing returns to scale?

Answer 19

doubling of the input less than doubles the output