Week 4

Question 1

What is production function?

Answer 1

A schedule showing the maximum amount of output that can be produced from any specified set of inputs.

Question 2

What is variable proportions production?

Answer 2

Production in which a given level of output can be produced with more than one combination of inputs.

Question 3

What is fixed proportions production?

Answer 3

Production in which one, and only one, ratio of inputs can be used to produce a good.

Question 4

What is technical efficiency?

Answer 4

Producing the maximum amount of output for any given combination of inputs and existing technology.

Question 5

What is economic efficiency?

Answer 5

Producing a given level of output at the lowest possible total cost.

Question 6

What is a variable input?

Answer 6

An input which the level of usage may be varied to increase or decrease output.

Question 7

What is a fixed input?

Answer 7

An input for which the level of usage cannot be changed and which must be paid for even if no output is produced.

Question 8

What is the planning horizon?

Answer 8

Set of all possible short-run situations the firm can face in the future.

Question 9

Are fixed costs sunk costs?

Yes or no?

Answer 9

Yes.

Question 10

Are avoidable costs variable costs?

Yes or no?

Answer 10

Yes.

Question 11

What is the formula for short run production function?

Answer 11

Q = F (L,K)

Question 12

True or false:

In the short run, capital is a fixed input

Answer 12

True.

Question 13

What is the formula for average product of labor?

Answer 13

AP = Q/L

Question 14

What is the formula Q/L?

Answer 14

Average Product of Labor.

Question 15

What is the marginal product of labor formula?

Answer 15

MP = 🔺Q/🔺L

Question 16

What is the formula 🔺Q/🔺L?

Answer 16

Marginal product of labor

Question 17

When AP is rising, ________ is greater than AP.

Answer 17

Marginal product.

Question 18

When AP is falling, _____________ is less than AP.

Answer 18

Marginal product.

Question 19

When AP reaches maximum, what happens?

Answer 19

AP = MP

Question 20

What is the law of diminishing marginal product?

Answer 20

As usage of a variable input increases, a point is reached beyond which its marginal product decreases.

Question 21

What is the formula for average product?

Answer 21

Q / L

Question 22

What is the formula for marginal product?

Answer 22

🔺Q / 🔺L

Question 23

How do you calculate 🔺Q?

Answer 23

Q2-Q1

Question 24

What does L equal?

Answer 24

Number of workers.

Question 25

What is total variable cost? (TVC)

Answer 25

Total amount paid for variable inputs, increases as output increases.

Question 26

What is total cost? (TC)

Answer 26

The sum of total fixed costs and total variable costs. TC = TFC + TVC

Question 27

What is the formula for total cost?

Answer 27

Total fixed cost plus total variable cost.

Question 28

What is the formula for average variable cost? (AVC)

Answer 28

Total variable cost / Quantity

Question 29

What is the formula for average total cost? (ATC)

Answer 29

Total cost / Quantity

Question 30

What is the average fixed cost formula?

Answer 30

AFC = TFC / Q

Question 31

What is the formula for short run marginal cost?

Answer 31

🔺TC / 🔺Q

Question 32

True or False: Short-run marginal costs cut ATC and AVC at their lowest point?

Answer 32

True

Question 33

True or False: AFC increases continuously as output increases?

Answer 33

False. AFC decreases as output increases.

Question 34

True or False: AVC is a straight line?

Answer 34

False. U-Shaped.

Question 35

True or False: ATC is U-Shaped.

Answer 35

True.

Question 36

True or False: SMC is U-Shaped.

Answer 36

True/

Question 37

True or False: SMC intersects AVC and ATC at their lowest points?

Answer 37

True.

Question 38

Average variable cost = W / what?

Answer 38

Average product.

Question 39

SMC = W / What?

Answer 39

Marginal Product

Question 40

TC = ____________

Answer 40

wL + rK

Question 41

True or False: When marginal product is increasing, marginal cost is increasing.

Answer 41

False.

Question 42

True or False: When Marginal product is decreasing, marginal cost is increasing.

Answer 42

True.

Question 43

Wage / Ap is the formula for?

Answer 43

Average variable cost

Question 44

What are the 2 ways to calculate AVC?

Answer 44

TVC/Q OR W/AP

Question 45

What are the two ways to calculate SMC?

Answer 45

W/MP OR 🔺TC/🔺Q

Question 46

What are the 2 ways to calculate TC?

Answer 46

AVC + AFC OR wL + rK

Question 47

What is the formula for TVC?

Answer 47

Cost per unit * total number of units

Question 48

What is the formula for AFC?

Answer 48

TFC/Q

Question 49

What is the formula for AVC?

Answer 49

TVC/Q

Question 50

What is the formula for SMC?

Answer 50

🔺TC/🔺Q or w/MP

Question 51

What is the formula for ATC?

Answer 51

TC/Q

Question 52

The law of diminishing product is illustrated by what?

Answer 52

The negative slope of the marginal product curve.

Question 53

Holding all other things constant, when the fixed inputs of production increase…

Answer 53

Average product and marginal product will increase.

Question 54

The marginal cost curve crosses both the average variable cost curve and the average total cost curve where?

Answer 54

At their lowest points.