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Questions and Answers
What characterizes the short run in production?
What characterizes the short run in production?
What happens to marginal product as more employees are hired initially?
What happens to marginal product as more employees are hired initially?
How is marginal cost calculated?
How is marginal cost calculated?
Which of the following best defines technical efficiency?
Which of the following best defines technical efficiency?
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What is the effect of diminishing returns on the total cost curve as output increases?
What is the effect of diminishing returns on the total cost curve as output increases?
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Study Notes
Production Concepts
- Production: The process of converting inputs (labor, capital) into outputs.
- Production Function: The relationship between the quantity of inputs used and the quantity of outputs produced.
- Fixed Input: An input with a quantity that remains constant for a period.
- Variable Input: An input whose quantity can be adjusted.
- Long Run: A period where all inputs can be varied.
- Short Run: A period where at least one input is fixed.
- Total Product Curve: Illustrates how output changes with changes in a variable input (holding other inputs constant).
- Marginal Product: The change in output resulting from a one-unit increase in a variable input. It initially rises, then falls.
Cost Concepts
- Technical Efficiency: Producing a given output using the least amount of inputs.
- Fixed Costs: Costs that do not depend on the level of output. (e.g., rent for a factory).
- Variable Costs: Costs that change with the level of output (e.g., wages for workers).
- Total Cost: The sum of fixed and variable costs.
Law of Diminishing Returns
- Diminishing Marginal Returns: Further increases in a variable input lead to smaller and smaller increases in output.
- Marginal Cost: The change in total costs resulting from producing one additional unit of output.
- Relationship between Marginal Cost & Marginal Product: These two concepts are inversely related; as Marginal Product declines, Marginal Cost tends to rise.
- Average Output/Marginal Productivity: Output produced divided by the amount of the variable factor employed.
- Marginal Product: The change in total output resulting from one additional unit of input.
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Description
This quiz covers key concepts related to production and costs in economics, including production functions, fixed and variable inputs, and efficiency. Test your understanding of how inputs transform into outputs and the associated costs in different time frames.
