30 Questions
Which of the following is a benefit of increased productivity mentioned in the text?
Lower business costs
What is the key factor for economic survival according to the text?
Productivity
What is the most identifiable and calculable input factor for measuring productivity?
Labor
In the example provided, why is labor the most appropriate input factor for determining productivity?
The firm uses only one (fixed) plant building
What concept is used to measure a firm's operating efficiency?
Total product, average product, and marginal product
What does total product measure?
The total output produced by a given number of inputs
What does average product measure?
The average output produced per unit of input
What does marginal product measure?
The additional output produced by adding one more unit of input
What is the relationship between productivity and the competitive position of a firm?
Increases in productivity reinforce and strengthen the competitive position of the firm over the long run
What should a fundamental analysis of a company examine?
The firm's commitment to productivity enhancements and the degree to which productivity is integrated into the competitive nature of the industry or market
Which of the following is true about the relationship between labor and capital?
Adding more labor to a fixed capital base will have no effect on production
What are the two inputs that economists typically focus on?
Labor and capital
How is the labor input measured?
Employee time
How is the capital input measured?
Machine hours used per time period
What is the formula for total cost of production?
TC = (w)(L) + (r)(K)
What is a cost function?
A relationship between the cost of production and the flow of output
What could cause the cost of producing any given level of output to fall?
Both a rise in input prices and a fall in input productivity
What does a firm strive to maximize?
Productivity
What happens when a firm lags behind the industry in productivity?
It faces decreases in future earnings and shareholders' wealth
What are the benefits of increased productivity?
Lower production costs
Which of the following is true about a firm's marginal cost?
It is the foundation of the firm's ability and willingness to offer a given quantity for sale
What are the three types of cost curves described in the text?
Total, average, and marginal costs
What does the law of diminishing marginal returns state?
Marginal product decreases as additional units of an input are employed
What is the initial effect of adding more labor to the production process?
Increasing returns due to specialization and division of labor
What happens to marginal productivity as more workers are added?
It initially increases and then decreases
In the context of economies and diseconomies of scale, what happens to long-run costs?
They can decrease or increase depending on the scale of production
What is the shutdown point of a firm?
The level of production where the firm minimizes its losses
What is the breakeven point of a firm?
The level of production where the firm covers all its costs
What is the relationship between marginal cost and average cost?
If marginal cost is below average cost, average cost is decreasing
What is the relationship between marginal product and marginal cost?
If marginal product is increasing, marginal cost is decreasing
Test your knowledge on understanding the firm's cost curves in the consumer goods market. Learn about total, average, and marginal costs and how they affect a firm's ability to offer products for sale.
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