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Managerial Economics > Week 4 > Flashcards

Week 4 Flashcards

1
Q

What is production function?

A

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

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2
Q

What is variable proportions production?

A

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

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3
Q

What is fixed proportions production?

A

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

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4
Q

What is technical efficiency?

A

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

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5
Q

What is economic efficiency?

A

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

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6
Q

What is a variable input?

A

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

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7
Q

What is a fixed input?

A

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

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8
Q

What is the planning horizon?

A

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

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9
Q

Are fixed costs sunk costs?

Yes or no?

A

Yes.

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10
Q

Are avoidable costs variable costs?

Yes or no?

A

Yes.

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11
Q

What is the formula for short run production function?

A

Q = F (L,K)

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12
Q

True or false:

In the short run, capital is a fixed input

A

True.

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13
Q

What is the formula for average product of labor?

A

AP = Q/L

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14
Q

What is the formula Q/L?

A

Average Product of Labor.

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15
Q

What is the marginal product of labor formula?

A

MP = 🔺Q/🔺L

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16
Q

What is the formula 🔺Q/🔺L?

A

Marginal product of labor

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17
Q

When AP is rising, ________ is greater than AP.

A

Marginal product.

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18
Q

When AP is falling, _____________ is less than AP.

A

Marginal product.

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19
Q

When AP reaches maximum, what happens?

A

AP = MP

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20
Q

What is the law of diminishing marginal product?

A

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

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21
Q

What is the formula for average product?

A

Q / L

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22
Q

What is the formula for marginal product?

A

🔺Q / 🔺L

23
Q

How do you calculate 🔺Q?

A

Q2-Q1

24
Q

What does L equal?

A

Number of workers.

25
Q

What is total variable cost? (TVC)

A

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

26
Q

What is total cost? (TC)

A

The sum of total fixed costs and total variable costs.

TC = TFC + TVC

27
Q

What is the formula for total cost?

A

Total fixed cost plus total variable cost.

28
Q

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

A

Total variable cost / Quantity

29
Q

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

A

Total cost / Quantity

30
Q

What is the average fixed cost formula?

A

AFC = TFC / Q

31
Q

What is the formula for short run marginal cost?

A

🔺TC / 🔺Q

32
Q

True or False:

Short-run marginal costs cut ATC and AVC at their lowest point?

A

True

33
Q

True or False:

AFC increases continuously as output increases?

A

False. AFC decreases as output increases.

34
Q

True or False:

AVC is a straight line?

A

False. U-Shaped.

35
Q

True or False:

ATC is U-Shaped.

A

True.

36
Q

True or False:

SMC is U-Shaped.

A

True/

37
Q

True or False:

SMC intersects AVC and ATC at their lowest points?

A

True.

38
Q

Average variable cost = W / what?

A

Average product.

39
Q

SMC = W / What?

A

Marginal Product

40
Q

TC = ____________

A

wL + rK

41
Q

True or False:

When marginal product is increasing, marginal cost is increasing.

A

False.

42
Q

True or False:

When Marginal product is decreasing, marginal cost is increasing.

A

True.

43
Q

Wage / Ap is the formula for?

A

Average variable cost

44
Q

What are the 2 ways to calculate AVC?

A

TVC/Q OR W/AP

45
Q

What are the two ways to calculate SMC?

A

W/MP OR 🔺TC/🔺Q

46
Q

What are the 2 ways to calculate TC?

A

AVC + AFC OR wL + rK

47
Q

What is the formula for TVC?

A

Cost per unit * total number of units

48
Q

What is the formula for AFC?

A

TFC/Q

49
Q

What is the formula for AVC?

A

TVC/Q

50
Q

What is the formula for SMC?

A

🔺TC/🔺Q or w/MP

51
Q

What is the formula for ATC?

A

TC/Q

52
Q

The law of diminishing product is illustrated by what?

A

The negative slope of the marginal product curve.

53
Q

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

A

Average product and marginal product will increase.

54
Q

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

A

At their lowest points.

Managerial Economics (5 decks)

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