Factors of Production and Entrepreneurship

Questions and Answers

Match the factor of production with its definition:

Payment of factor of production = Compensation for the use of factors of production Stage of production function = Relationship between input and output in the production process Law of returns to scale = The effect of increasing all factors of production on output

Match the stage of returns to scale with its description:

First stage - increasing returns to scale (IRS) = Output increases more than proportionally to input increase Second stage - Constant returns to scale (CRS) = Output increases in the same proportion as input increase Third stage - Decreasing returns to scale (DRS) = Output increases less than proportionally to input increase

Match the stage of returns to scale with its graphical representation:

First stage - increasing returns to scale (IRS) = Distance between successive isoquants becomes less and less Second stage - Constant returns to scale (CRS) = Distance between successive isoquants is equal Third stage - Decreasing returns to scale (DRS) = Distance between successive isoquants becomes more and more

Match the concept with its explanation:

Long run in production = All factors of production are variable Variable factor of production = Factor that can be changed by changing its quantity Fixed factor of production = Factor that cannot be changed in the short run Signup and view all the answers

Match the term with its characteristic:

Increasing returns to scale = Output increases at a greater rate than input increase Constant returns to scale = Output increases at the same rate as input increase Decreasing returns to scale = Output increases at a slower rate than input increase Signup and view all the answers

In the long run, are all factors of production variable or fixed?

All factors of production are variable in the long run. Signup and view all the answers

What is the term used for the production function where output increases in the same proportion as the increase in inputs?

Constant returns to scale (CRS) Signup and view all the answers

What are the three stages of returns to scale?

Increasing returns to scale (IRS), Constant returns to scale (CRS), Decreasing returns to scale (DRS) Signup and view all the answers

In the first stage of returns to scale, how are the isoquants positioned in relation to each other?

The distance between successive isoquants becomes less and less, with OA > AB > BC. Signup and view all the answers

What are the four factors of production in the context of entrepreneurship?

Land, labor, capital, and enterprise Signup and view all the answers

What is another name for the production function with constant returns to scale?

Linear homogeneous production function Signup and view all the answers

What are the distances between successive isoquants in the second stage of returns to scale?

The distances between successive isoquants are equal, with OA = AB = BC. Signup and view all the answers

What does the third stage of returns to scale indicate?

The third stage indicates decreasing returns to scale (DRS). Signup and view all the answers

Can the scale of production be changed in the long run? If yes, how?

Yes, the scale of production can be changed by changing the quantity of all factors of production. Signup and view all the answers

Are all factors of production fixed in the long run?

No, all factors of production are variable in the long run. Signup and view all the answers