Econ Exam 2- Modules 20-22

question

Production

answer

process of turning inputs into outputs

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production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces

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fixed input

answer

input whose quantity is fixed for a period and cannot be varied

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variable input

answer

input whose quantity the firm can vary at any time

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long run

answer

period in which all inputs can be varied

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short run

answer

period in which at least one input is fixed

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total product curve shows

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how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input

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Marginal product of labor

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-change in output resulting from a one-unit increase in the amount of labor input
MPL = (change in Q/ change in L)

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total cost =

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fixed cost + variable cost

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marginal cost=

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change in total cost / change in quantity

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atc=

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TC/Q of output

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afc=

answer

FC/Q

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avc

answer

VC/Q

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Increasing output has two opposing effects on average total cost:

answer

-spreading effect
-diminishing returns effect

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spreading effect

answer

the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost

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diminishing returns effect

answer

the larger the output, the greater the amount of variable input required to produce additional units, leading to higher average variable cost

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Marginal cost is upward-sloping because of

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diminishing returns

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The long-run average total cost curve shows

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relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

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increasing returns to scale

answer

when long-run average total cost declines as output increases

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decreasing returns to scale

answer

when long-run average total cost increases as output increases

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constant returns to scale

answer

when long-run average total cost is constant as output increases

1 of 21

question

Production

answer

process of turning inputs into outputs

question

production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces

question

fixed input

answer

input whose quantity is fixed for a period and cannot be varied

question

variable input

answer

input whose quantity the firm can vary at any time

question

long run

answer

period in which all inputs can be varied

question

short run

answer

period in which at least one input is fixed

question

total product curve shows

answer

how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input

question

Marginal product of labor

answer

-change in output resulting from a one-unit increase in the amount of labor input
MPL = (change in Q/ change in L)

question

total cost =

answer

fixed cost + variable cost

question

marginal cost=

answer

change in total cost / change in quantity

question

atc=

answer

TC/Q of output

question

afc=

answer

FC/Q

question

avc

answer

VC/Q

question

Increasing output has two opposing effects on average total cost:

answer

-spreading effect
-diminishing returns effect

question

spreading effect

answer

the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost

question

diminishing returns effect

answer

the larger the output, the greater the amount of variable input required to produce additional units, leading to higher average variable cost

question

Marginal cost is upward-sloping because of

answer

diminishing returns

question

The long-run average total cost curve shows

answer

relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

increasing returns to scale

answer

when long-run average total cost declines as output increases

question

decreasing returns to scale

answer

when long-run average total cost increases as output increases

question

constant returns to scale

answer

when long-run average total cost is constant as output increases

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Econ Exam 2- Modules 20-22

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