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Economics of Healthcare: Production Function and Profit Incentives

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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?

The amount of money available for the purpose (B) Signup and view all the answers

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

Input combinations (C) Signup and view all the answers

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

Equal (B) Signup and view all the answers

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

MRTS is the slope of an isoquant in the production function (B) Signup and view all the answers

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

To determine the optimal input combination (C) Signup and view all the answers

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

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 (B) Signup and view all the answers

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

The marginal rate of technical substitution will decrease as one input is substituted for another (C) Signup and view all the answers