This document discusses key concepts in production theory and cost of production, including:
- The difference between short run and long run is that in the short run at least one resource is fixed, while in the long run all resources are variable.
- The law of diminishing marginal returns states that beyond a certain point, adding more of a variable input will result in lower marginal products.
- Production function shows the relationship between inputs and outputs. Product curves like total product, average product and marginal product illustrate how outputs change as inputs are varied in the short run.
- Isoquants reflect combinations of inputs that produce the same output amount, and show substitution between inputs. The law of diminishing returns
This document discusses key concepts in production theory and cost of production, including:
- The difference between short run and long run is that in the short run at least one resource is fixed, while in the long run all resources are variable.
- The law of diminishing marginal returns states that beyond a certain point, adding more of a variable input will result in lower marginal products.
- Production function shows the relationship between inputs and outputs. Product curves like total product, average product and marginal product illustrate how outputs change as inputs are varied in the short run.
- Isoquants reflect combinations of inputs that produce the same output amount, and show substitution between inputs. The law of diminishing returns
This document discusses key concepts in production theory and cost of production, including:
- The difference between short run and long run is that in the short run at least one resource is fixed, while in the long run all resources are variable.
- The law of diminishing marginal returns states that beyond a certain point, adding more of a variable input will result in lower marginal products.
- Production function shows the relationship between inputs and outputs. Product curves like total product, average product and marginal product illustrate how outputs change as inputs are varied in the short run.
- Isoquants reflect combinations of inputs that produce the same output amount, and show substitution between inputs. The law of diminishing returns
This document discusses key concepts in production theory and cost of production, including:
- The difference between short run and long run is that in the short run at least one resource is fixed, while in the long run all resources are variable.
- The law of diminishing marginal returns states that beyond a certain point, adding more of a variable input will result in lower marginal products.
- Production function shows the relationship between inputs and outputs. Product curves like total product, average product and marginal product illustrate how outputs change as inputs are varied in the short run.
- Isoquants reflect combinations of inputs that produce the same output amount, and show substitution between inputs. The law of diminishing returns
1. Which of the following statements is the main difference between short run and long run? A. The law of diminishing marginal returns applies in the long run B. All resources are fixed in the short run, while all resources are variables in short run C. All resources are variables in long run, while at least one resources are fixed in short run D. Fixed cost are more important to decision making in the long run compared to short run
2. The law of diminishing marginal returns states that:
A. Beyond some point, the additional outputs produced will results to customer dissatisfaction B. When extra units of variable inputs are added, the marginal product will decline beyond some point C. The demand for goods produced in competitive industries is down sloping D. A competitive firm’s long run average cost curve will be U-shaped
3. Which of the following statements on the relationship between total product (TP), average product (AP) and marginal product (MP) is incorrect? A. TP reaches a maximum when the MP of the variable input becomes zero B. AP reaches a maximum, before TP reaches a maximum C. AP continues to rise, so long as TP is rising D. MP cuts AP at the maximum AP
Questions 4 and 5 based on the following graph
4. Curves A, B and C are _________________________ product curves, respectively
A. Total, average and marginal B. Total, marginal and average C. Marginal, average and total D. Average, marginal and total
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https://www.coursehero.com/file/103106879/Copy-of-EXERCISE-PRODUCTIONdocx/ 5. Which of the following statements is implied by the above graph? A. Total product is at minimum when the marginal product is zero B. Total product is at maximum when the marginal product is at maximum C. Average product is increasing when the marginal product lies below the average product D. Average product is increasing when the marginal product lies above the average product
6. When output increases in higher proportions than the increases in inputs, the return to scale is? A. Decreasing B. Increasing C. Negative D. Constant
7. If the variable input is added to some fixed inputs, beyond some point, the resulting extra output or marginal product will decline. The statement refers to: A. Diseconomies of scale B. The law of diminishing returns C. Economies and diseconomies of scale D. the law of diminishing marginal utility
8. An isoquant curve reflects:
A. All the possible combinations of two inputs that give the same level of output B. All the possible combinations of two inputs that give different levels of output C. All the possible combinations of two products which give the same profit D. None of the above
9. An isoquant that is ____________
A. Far away from the origin represents larger outputs B. Far away from the origin represents fewer outputs C. Steeper represents larger outputs D. Flatter represents fewer outputs
10. Suppose a firm increases its input by 10%, while its outputs decreased by 15%, the firm is experiencing: A. Decreasing returns to scale B. Increasing returns to scale C. Constant returns to scale D. Diminishing returns
11. Production function shows the relationship between
A. Cost and input B. Cost and output C. Input and output
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https://www.coursehero.com/file/103106879/Copy-of-EXERCISE-PRODUCTIONdocx/ 12. The law of diminishing returns sets in at ________ of the above graph A. Point A B. Point B C. Point C D. Point D
13. The marginal product curve and average product curve intersects _______________ A. Where marginal product equals zero B. Where total product is at a maximum C. At the maximum point of the average product curve D. At the maximum point of the marginal product curve
14. When the average product curve is rising
A. The marginal product curve lies above the average product curve B. The marginal product curve lies below the average product curve C. The marginal product curve cuts the average product curve D. None of the above
15. In the short run, product curves have all the following characteristics, except: A. Total product is at its maximum when marginal product equals zero B. Total product begins to decrease when average products begin to decrease C. Average product is at its maximum when average product equals marginal product D. When average product equals the marginal product, then the total product must be rising
16. It is impossible for total product to be __________ when the marginal product is __________ A. Positive, negative B. Decreasing, positive C. Increasing, increasing D. Increasing, decreasing
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https://www.coursehero.com/file/103106879/Copy-of-EXERCISE-PRODUCTIONdocx/ 17. If the units of a variable factor are increased on a fixed factor, after a point, the marginal product of the variable factor _________________ A. Increases B. Diminishes C. Remains constant D. None of the above
Number of workers Total Product Marginal Product
0 0 -
1 3 3
2 5
3 12
4 15
5 1
Question 18, 19 and 20 based on the following table
18. When this manufacturing company employs two workers, the ___________________ A. Total product is 4 B. Total product is 20 C. Average product is 4 D. Average product is 10
19. The marginal product of the 4th worker is __________ of outputs
A. 3 units B. 5 units C. 3.8 units D. 3.2 units
20. What is the Total Product if the company employs 5 workers?
A. 15 B. 18 C. 16 D. 21
21. How many workers the company needs to employ when the average product is 3.75? A. 2 B. 3
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https://www.coursehero.com/file/103106879/Copy-of-EXERCISE-PRODUCTIONdocx/ C. 4 D. 5
22. An example of implicit cost for a firm is the ____________
A. Foregone payment in term of salaries and wages to the owners of the firm B. Payment of salaries and wages to workers by the firm C. Payment for resources used in production by the firm D. None of the above
23. In the short run, a firm which produces 100 units of output has an average total cost of RM200 and average variable cost of RM150. The firm’s Total Fixed Cost is ___________ A. RM5,000 B. RM500 C. RM50 D. RM0.50
24. If a firm produces 20,000 bottles of tomato in a month, and the selling price is RM1.50 per bottle, the implicit cost of production is RM5,000. The explicit cost of production is RM15,000. Thus, the firm has an economic profit of _______________ and accounting profit of __________________ A. RM15,000: RM5,000 B. RM5,000: RM15,000 C. RM15,000: RM10,000 D. RM10,000: RM15,000
25. If a firm decides to produce no output in the short run, which of the following cost will be zero? A. Its total cost B. Its fixed cost C. Its average cost D. Its variable cost
26. The average total cost equals to:
A. Total cost minus total output B. Average fixed cost divided by average variable cost C. Average fixed cost minus average variable cost D. Average fixed cost plus average variable cost
27. Which of the following short run costs continues to decrease as output increases? A. Average variable cost B. Average fixed cost C. Marginal cost D. Average cost
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https://www.coursehero.com/file/103106879/Copy-of-EXERCISE-PRODUCTIONdocx/ 28. In the long run, a company has __________________ A. Insufficient time to enter or leave the market B. The ability to adjust its resources C. At least one fixed input D. None of the above
29. In which time period are all inputs variables?
A. The long run B. The short run C. The financial year D. None of the above
30. Suppose a firm is able to double its production in the long run and its cost of production declines, we can conclude that the firm is experiencing___________________ A. Diseconomies of scale B. Diminishing returns C. Economies of scale D. None of the above
31. An isoquant that is ____________
A. Far away from the origin represents higher cost B. Far away from the origin represents lower cost C. Steeper represents larger cost D. Flatter represents fewer cost
32. An Isocost curve reflects:
A. All the possible combinations of two inputs with a same total cost B. All the possible combinations of two inputs with different total cost C. All the possible combinations of two inputs which give the same profit D. None of the above
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