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Questions and Answers
What is the process of creating goods and services using various resources and factors of production?
Which branch of microeconomics studies how firms make production decisions to maximize profits or minimize costs?
What describes the relationship between inputs and outputs in production?
What is the name of the production function that describes a proportional increase in outputs resulting from a proportional increase in inputs?
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What is the economic concept that describes the decrease in additional output or productivity gained from an additional unit of a specific input?
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What type of production function is the Cobb-Douglas Production Function an example of?
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Study Notes
Production and Production Function
- Refers to the process of creating goods and services using various resources and factors of production, such as labor, capital, land, and entrepreneurship
- A branch of microeconomics that studies how firms make production decisions to maximize profits or minimize costs
- Examines the relationships between inputs and outputs, and how they can be combined to produce goods and services efficiently
Types of Production Functions
- Linear Production Function
- Cobb-Douglas Production Function
- Translog Production Function
- CES (Constant Elasticity of Substitution) Production Function
Characteristics of Production Functions
- Proportional increase in inputs results in a proportional increase in output (Linear Production Function)
- Does not capture the complexities of real-world production processes (Linear Production Function)
Law of Diminishing Returns
- Economic concept that describes the decrease in additional output or productivity gained from an additional unit of a specific input, while keeping all other inputs constant
Elasticity of Substitution
- Measures the percent (%) change in output due to percent (%) change in labor or capital input
Production Possibility Frontier
- Technological relationship between the amounts of two or more inputs and the amount of output that can be produced by those inputs
Returns to Scale
- Economic concept that describes the relationship between inputs and outputs in the long run
- Refers to the degree to which a proportional increase in all inputs results in a corresponding increase in output
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Description
This quiz covers the basics of production and cost in microeconomics, including the factors of production and how firms make decisions to maximize profits or minimize costs.
