Unit 4 - Production

Question 1

Production function

Answer 1

Reflects the maximum production quantity that an enterprise can produce with any given combination of production factors.
q = F(k, l)
k=capital, l=labor

Question 2

isoquant

Answer 2

Is the graphical representation of all possible combinations of the factors of production with which the same amount of output can be produced.

Question 3

Marginal rate of technical substitution (MRTS)

Answer 3

is the amount by which, for the same output, the quantity of one production factor can be reduced if an additional unit of the other product factor is used.

Question 4

Marginal yields

Answer 4

is an additional output obtained by increasing a production factor by one additional unit.

Question 5

Returns to scale

Answer 5

the rate at which output increases when all factors of production are increased proportionally.

Question 6

Average costs

Answer 6

is the total cost of the company divided by its production level.

Question 7

Marginal cost

Answer 7

increase in cost resulting from the production of an additional unit of output.

Question 8

economies of scale

Answer 8

Occur when the average cost per unit decreases as production increases.
Larger production volumes allow businesses to operate more efficiently.

Question 9

diseconomies of scale

Answer 9

occur when the average cost per unit increases as production expands.
Large company problem, inefficiencies as bureaucracy, commnication issues etc.

Question 10

deprecation

Answer 10

is an accounting treatment in which the one-off cost of a machine is treated as an annual cost spread over its useful life.

Question 11

isocost line

Answer 11

represents all possible combinations of production factors that can be purchased at a certain total cost

Question 12

expansion path

Answer 12

is the curve that runs through the tangential points of isoquant and isocost lines of a company.

Question 13

Price takers

Answer 13

In a competitive market, a supplier is able to take the market price for garanted and merely adjust their own supply according to it.

Question 14

Marginal revenue

Answer 14

The change in the total proceeds from the sale of an additional product unit.
market price 4$ - marginal cost 3$ = 1$ additional profit

Question 15

Marginal principle

Answer 15

Fundamental methodological principle, the additional marginal returns and costs resulting from a change in behavior are relevant for decision-making.

Question 16

Max profit formula

Answer 16

max profit = quantity * (market price - average cost)

Question 17

efficient production volume

Answer 17

is the production quantity that leads to the minimization of average costs.