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Questions and Answers
Which of the following factors are considered as the primary factors of production?
Which of the following factors are considered as the primary factors of production?
What term is used for the man-made physical goods used to produce other goods and services?
What term is used for the man-made physical goods used to produce other goods and services?
What is the formula for calculating Average Product (AP)?
What is the formula for calculating Average Product (AP)?
Which factor is referred to as the changing agent of society?
Which factor is referred to as the changing agent of society?
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According to which economist, is uncertainty-bearing a key role of an entrepreneur?
According to which economist, is uncertainty-bearing a key role of an entrepreneur?
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What term is used for the functional relationship between inputs and outputs in production?
What term is used for the functional relationship between inputs and outputs in production?
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What is the relationship between the price of a commodity and the supply of commodity?
What is the relationship between the price of a commodity and the supply of commodity?
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If the average product is decreasing, what can be said about the marginal product?
If the average product is decreasing, what can be said about the marginal product?
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What does a production function measure?
What does a production function measure?
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According to George J. Stigler, how is a production function defined?
According to George J. Stigler, how is a production function defined?
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Which one of these is classified as a factor of production?
Which one of these is classified as a factor of production?
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What does labour represent in the context of production?
What does labour represent in the context of production?
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What is the main idea behind the concept of Producer’s Equilibrium?
What is the main idea behind the concept of Producer’s Equilibrium?
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In Producer’s Equilibrium, what condition must be met at the point of tangency between the iso-cost line and iso-quant curve?
In Producer’s Equilibrium, what condition must be met at the point of tangency between the iso-cost line and iso-quant curve?
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What does the Cobb-Douglas Production Function state about the ability to substitute factors of production?
What does the Cobb-Douglas Production Function state about the ability to substitute factors of production?
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What does the parameter ß represent in the Cobb-Douglas Production Function?
What does the parameter ß represent in the Cobb-Douglas Production Function?
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How can factor intensity be measured according to the Cobb-Douglas Production Function?
How can factor intensity be measured according to the Cobb-Douglas Production Function?
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Which condition reflects a situation where a larger outlay is required in the context of Producer’s Equilibrium?
Which condition reflects a situation where a larger outlay is required in the context of Producer’s Equilibrium?
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Study Notes
Factors of Production
- Primary factors of production include land, labor, capital, and entrepreneurship.
- Labor represents the human effort used in the creation of goods and services.
Man-Made Goods
- Man-made physical goods used to produce other goods and services are referred to as capital.
Average Product (AP)
- The formula for calculating Average Product (AP) is AP = Total Output / Total Inputs.
Changing Agent of Society
- The factor referred to as the changing agent of society is entrepreneurship.
Uncertainty-Bearing and Entrepreneurship
- Economist Joseph Schumpeter posited that uncertainty-bearing is a key role of an entrepreneur.
Production Function
- The functional relationship between inputs and outputs in production is called a production function.
Price and Supply Relationship
- An increase in the price of a commodity typically leads to an increase in the supply of that commodity, following the law of supply.
Average Product and Marginal Product Relationship
- If the average product is decreasing, it implies that the marginal product is also decreasing and may become less than the average.
Measurement of Production Function
- A production function measures the maximum output that can be achieved with a given set of inputs.
Definition by George J. Stigler
- According to George J. Stigler, a production function is defined as a relationship that gives the maximum output obtainable from different combinations of inputs.
Classifying Factors of Production
- Factors of production can be classified as land, labor, capital, and entrepreneurship.
Producer’s Equilibrium Concept
- The main idea behind Producer’s Equilibrium is that a firm aims to maximize its output while minimizing its costs.
Iso-Cost and Iso-Quant Conditions
- In Producer’s Equilibrium, the condition at the point of tangency between the iso-cost line and iso-quant curve is where the marginal rate of technical substitution equals the price ratio of inputs.
Cobb-Douglas Production Function
- The Cobb-Douglas Production Function suggests that factors of production can be substituted for one another to some extent.
Parameter ß in Cobb-Douglas
- The parameter ß in the Cobb-Douglas Production Function represents the output elasticity of a specific input.
Measuring Factor Intensity
- Factor intensity in the Cobb-Douglas Production Function can be measured by the ratio of the marginal products of the inputs employed.
Larger Outlay in Producer's Equilibrium
- A condition reflecting a larger outlay in the context of Producer’s Equilibrium indicates a higher expenditure for maintaining consistent production levels.
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Description
Test your knowledge on microeconomics concepts related to production and cost functions. Questions cover topics such as MRTS, price ratio, isoquant, isocost lines, average product, marginal product, and production functions.
