BUS 207 – Module 3

question

Productivity

answer

measures output per unit of input(s)

question

For firms and industries, productivity growth leads to...

answer

lower unit costs, higher market shares, higher profits

question

For nations, productivity growth leads to....

answer

higher GDP/capita, higher wages, higher standard of living

question

Production Function

answer

indicates the maximum output (Q) that can be produced for every specified combinations

question

Long-Run Production Function

answer

Q = f (K, L ; t) - all inputs are variable

question

Short-Run Production Function

answer

Q = f (K, L ; t) - K & t are fixed

question

Production function may be applied to most firms and countries so long as...

answer

inputs and outputs are clearly defined

question

Average Product of Labour (APl)

answer

Q / L

question

Marginal Product of Labour (MPl)

answer

change in Q / change in L

question

APl is the most common measure of productivity for firms because...

answer

easy measurement, and can be used across all industries

question

Law of Diminishing Returns

answer

as units of one product are added, resulting additions to output will eventually begin to decrease

question

Average Product of Labour (Graph)

answer

slope of a line from the origin to any intersection on the production curve

question

Marginal Product of Labour (Graph)

answer

slope of the tangent of the production curve

question

Labour Productivity

answer

output per unit of labour

question

In short-run productivity measures, you should always use a benchmark like...

answer

similar organizations, average competitor

question

Another equation for MC = ML

answer

P*MPl = w

question

Long-run productivity growth depends on....

answer

technological change, capital investments, human capital, returns to scale

question

Labour productivity in the long-run can be increased/shifted by....

answer

more and better capital, technological change, and higher quality workers

question

Returns to Scale

answer

the effect on Q of increasing all inputs by the same amount

question

Constant Returns to Scale

answer

Q increases by S

question

Increasing Returns to Scale

answer

Q increases by more than S

question

Decreasing Returns to Scale

answer

Q increases by less than S

question

Cobb-Douglas Production Function

answer

q = 𝒂LᶜKᵈ

question

Production Analysis

answer

the relationship between physical outputs and physical inputs

question

Cost Analysis

answer

examine the way in which dollar costs are affected by output choices and input prices

question

Opportunity Costs

answer

foregone benefits associated with using resources in their best alternative use

question

Economic Profits

answer

difference between what is being earned and what could be earned in the next best alternative

question

Fixed Costs

answer

do not vary with ouput

question

Variable costs

answer

do vary with output

question

In the long run...

answer

fixed costs are avoidable, variable costs are unavoidable

question

In the short run,

answer

some costs are fixed and some are variable

question

Sunk Costs

answer

expenditures that have already been incurred and cannot be recovered (entry barriers)

question

Sunk costs are irrelevant to....

answer

operating decisions and forward looking decisions

question

Some exit costs act as sunk costs that result in...

answer

exit barriers

question

Sunk Cost Effect

answer

results in an incumbent firm that slow to adopt in a new technology

question

Real economies of scale arise from...

answer

more efficient use of real resources

question

Precuniary economies of scale arise from...

answer

reduced input prices

question

Minimum Efficient Scale (MES)

answer

the minimum plant or firm size at which economies of scale are exhausted

question

Minimum efficient scale is an important determinant of...

answer

market structure (# of firms in an industry)

question

Learning/Experience Curve

answer

charts with cost reductions associated with higher cumulative output

question

Total costs are affected not just by scale of operations but also by the....

answer

composition of outputs

question

Economies of Scope

answer

present when the joint output of a single firm costs less than the sum of costs

question

Economies of scope arise because of...

answer

shared inputs, and costs complementaries

question

Shared Inputs

answer

occur at the level of production unit or multi-plant level

question

Cost Complements

answer

occur when producing more of one good reduces the cost of another good

question

Cost complements are occurring because of

answer

knowledge spillovers

1 of 46

question

Productivity

answer

measures output per unit of input(s)

question

For firms and industries, productivity growth leads to...

answer

lower unit costs, higher market shares, higher profits

question

For nations, productivity growth leads to....

answer

higher GDP/capita, higher wages, higher standard of living

question

Production Function

answer

indicates the maximum output (Q) that can be produced for every specified combinations

question

Long-Run Production Function

answer

Q = f (K, L ; t) - all inputs are variable

question

Short-Run Production Function

answer

Q = f (K, L ; t) - K & t are fixed

question

Production function may be applied to most firms and countries so long as...

answer

inputs and outputs are clearly defined

question

Average Product of Labour (APl)

answer

Q / L

question

Marginal Product of Labour (MPl)

answer

change in Q / change in L

question

APl is the most common measure of productivity for firms because...

answer

easy measurement, and can be used across all industries

question

Law of Diminishing Returns

answer

as units of one product are added, resulting additions to output will eventually begin to decrease

question

Average Product of Labour (Graph)

answer

slope of a line from the origin to any intersection on the production curve

question

Marginal Product of Labour (Graph)

answer

slope of the tangent of the production curve

question

Labour Productivity

answer

output per unit of labour

question

In short-run productivity measures, you should always use a benchmark like...

answer

similar organizations, average competitor

question

Another equation for MC = ML

answer

P*MPl = w

question

Long-run productivity growth depends on....

answer

technological change, capital investments, human capital, returns to scale

question

Labour productivity in the long-run can be increased/shifted by....

answer

more and better capital, technological change, and higher quality workers

question

Returns to Scale

answer

the effect on Q of increasing all inputs by the same amount

question

Constant Returns to Scale

answer

Q increases by S

question

Increasing Returns to Scale

answer

Q increases by more than S

question

Decreasing Returns to Scale

answer

Q increases by less than S

question

Cobb-Douglas Production Function

answer

q = 𝒂LᶜKᵈ

question

Production Analysis

answer

the relationship between physical outputs and physical inputs

question

Cost Analysis

answer

examine the way in which dollar costs are affected by output choices and input prices

question

Opportunity Costs

answer

foregone benefits associated with using resources in their best alternative use

question

Economic Profits

answer

difference between what is being earned and what could be earned in the next best alternative

question

Fixed Costs

answer

do not vary with ouput

question

Variable costs

answer

do vary with output

question

In the long run...

answer

fixed costs are avoidable, variable costs are unavoidable

question

In the short run,

answer

some costs are fixed and some are variable

question

Sunk Costs

answer

expenditures that have already been incurred and cannot be recovered (entry barriers)

question

Sunk costs are irrelevant to....

answer

operating decisions and forward looking decisions

question

Some exit costs act as sunk costs that result in...

answer

exit barriers

question

Sunk Cost Effect

answer

results in an incumbent firm that slow to adopt in a new technology

question

Real economies of scale arise from...

answer

more efficient use of real resources

question

Precuniary economies of scale arise from...

answer

reduced input prices

question

Minimum Efficient Scale (MES)

answer

the minimum plant or firm size at which economies of scale are exhausted

question

Minimum efficient scale is an important determinant of...

answer

market structure (# of firms in an industry)

question

Learning/Experience Curve

answer

charts with cost reductions associated with higher cumulative output

question

Total costs are affected not just by scale of operations but also by the....

answer

composition of outputs

question

Economies of Scope

answer

present when the joint output of a single firm costs less than the sum of costs

question

Economies of scope arise because of...

answer

shared inputs, and costs complementaries

question

Shared Inputs

answer

occur at the level of production unit or multi-plant level

question

Cost Complements

answer

occur when producing more of one good reduces the cost of another good

question

Cost complements are occurring because of

answer

knowledge spillovers

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BUS 207 – Module 3

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