Economics: Production Theory
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Questions and Answers

What is the study of production in economics?

  • The study of consumption
  • The study of production, or the economic process of converting inputs into outputs (correct)
  • The study of distribution
  • The study of supply and demand

    • What is the term for the resources used in the production process?

  • Elements of production
  • Components of production
  • Factors of production (correct)
  • Inputs of production

    • What does the production function show?

  • The relationship between the quantity of inputs used to make a good and the quantity of output of that good (correct)
  • The relationship between the quantity of inputs and the price of the good
  • The relationship between the quantity of output and the price of the good
  • The relationship between the cost of production and the quantity of output

    • What is the total product of a variable factor of production?

    <p>What outputs are possible using various levels of the variable input</p> Signup and view all the answers

    What is diminishing marginal product a property of?

    <p>The decline in marginal product as the quantity of an input increases</p> Signup and view all the answers

    What is the average product of a variable factor of production?

    <p>The total production divided by the number of units of variable input employed</p> Signup and view all the answers

    What is the marginal product of an input in the production process?

    <p>The increase in output that arises from an additional unit of that input</p> Signup and view all the answers

    What happens to the average and marginal product curves initially?

    <p>They both rise</p> Signup and view all the answers

    When does the marginal product equal the average product?

    <p>When the average product is at its maximum</p> Signup and view all the answers

    What is the point of intersection of the average and marginal product curves?

    <p>The point where the average product is at its maximum</p> Signup and view all the answers

    What are the two forces that make market economies work?

    <p>Supply and demand</p> Signup and view all the answers

    What is the relationship between marginal product and average product when average product is rising?

    <p>The marginal product exceeds the average product</p> Signup and view all the answers

    How do economists and accountants view a firm differently?

    <p>Economists view a firm as a profit-maximizing entity, while accountants view a firm as a cost-minimizing entity.</p> Signup and view all the answers

    What is the main difference between fixed costs and variable costs?

    <p>Fixed costs are the costs of production that do not vary with the quantity of output produced.</p> Signup and view all the answers

    What is the formula to calculate total costs?

    <p>TC = TFC + TVC</p> Signup and view all the answers

    What do average costs represent?

    <p>The total cost of producing one unit of a product.</p> Signup and view all the answers

    What is the relationship between total costs and output?

    <p>As output increases, total costs increase.</p> Signup and view all the answers

    What is the purpose of dividing costs into fixed and variable costs?

    <p>To understand how costs change with the quantity of output produced.</p> Signup and view all the answers

    What is the term sometimes used to describe the quantity that minimizes average total cost?

    <p>Efficient scale</p> Signup and view all the answers

    What happens to average total cost when marginal cost is less than it?

    <p>It falls</p> Signup and view all the answers

    What is the point at which a firm maximizes its profit?

    <p>Where MR = MC</p> Signup and view all the answers

    What is the shape of the average-total-cost curve?

    <p>U-shaped</p> Signup and view all the answers

    What is the term for the decrease in average total cost as the quantity of production increases?

    <p>Economies of scale</p> Signup and view all the answers

    What is the formula for calculating average revenue?

    <p>TR/Q</p> Signup and view all the answers

    What happens to marginal cost as output increases?

    <p>It eventually rises</p> Signup and view all the answers

    What is the difference between short-run and long-run cost curves?

    <p>Fixed costs are considered in the short run, but become variable in the long run</p> Signup and view all the answers

    What is the term for the situation where the average total cost of production increases as the quantity of production increases?

    <p>Diseconomies of scale</p> Signup and view all the answers

    What is the point at which the marginal-cost curve crosses the average-total-cost curve?

    <p>The minimum of average total cost</p> Signup and view all the answers

    What is the condition for a firm to continue producing?

    <p>MR &gt; MC</p> Signup and view all the answers

    What is the term for the situation where the average total cost of production remains constant as the quantity of production increases?

    <p>Constant returns to scale</p> Signup and view all the answers

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