Economics of Healthcare: Production Function and Profit Incentives
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Questions and Answers

What is the principle underlying the rate of technical substitution?

  • Principle of diminishing marginal returns (correct)
  • Principle of increasing marginal returns
  • Principle of constant marginal returns
  • Principle of zero marginal returns

    • What is the marginal rate of technical substitution (MRTS) a measure of?

  • The rate of substitution between two variable inputs in the same isoquant (correct)
  • The rate of substitution between two variable inputs in different isoquants
  • The rate of change in the production function with one variable input
  • The rate of change in the production function with a fixed input ratio

    • What is the term for the line that displays the productive inputs that have the same cost?

  • Production possibility frontier
  • Supply curve
  • Isocost line (correct)
  • Isoquant curve

    • What is the letter 'C' a representation of in the context of isocost lines?

    <p>The amount of money available for the purpose</p> Signup and view all the answers

    What is the term for the affordable input combinations that a producer could choose from?

    <p>Input combinations</p> Signup and view all the answers

    What is the meaning of the Greek word 'iso' in the context of isocost lines?

    <p>Equal</p> Signup and view all the answers

    What is the relationship between the marginal rate of technical substitution and the production function?

    <p>MRTS is the slope of an isoquant in the production function</p> Signup and view all the answers

    What is the purpose of the marginal rate of technical substitution in production?

    <p>To determine the optimal input combination</p> Signup and view all the answers

    What is the difference between an isoquant curve and an isocost line?

    <p>An isoquant curve shows the productive inputs that have the same output, while an isocost line shows the productive inputs that have the same cost</p> Signup and view all the answers

    What is the implication of the principle of diminishing marginal returns on the marginal rate of technical substitution?

    <p>The marginal rate of technical substitution will decrease as one input is substituted for another</p> Signup and view all the answers

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