ECON 102 Lecture Notes - Lecture 17: Masonry Oven, Binary Relation, Marginal Product

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11 Apr 2017

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A process of combining resources (inputs) and transforming them into products (outputs) It shows the maximum output that can be produced with a given amount of inputs. How much outcome you have is also dependent on your level of technology. So more tech is higher output so this depends on inputs and tech. Q = f(l,k) q is output, l labor and k capital. In the short run, k is fixed therefore, q=f(l,k) [the bar means fixed] If you hire more labor but capital is fixed, your return from the production starts diminishing because you"re paying them more but they"re working with a fixed amount of inputs. Output depends on labor (because it"s the only thing that"s changing) Marginal product: amount of product you get from hiring additional labor. Difference between marginal product and marginal utility product increases at first and then decreases.

Related Questions

Question:

Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.

Answer:

According to the definition of the short-run in Investopedia, the short-run, in economics, expresses the concept that an economy behaves differently depending on the length of time it has to react to certain stimuli. The short-run does not refer to a specific duration of time but rather is unique to the firm, industry, or economic variable being studied. A key principle guiding the concept of short-run and long-run is that in the short-run, firms face both variable and fixed costs, which means that output, wages and prices do not have full freedom to reach a new equilibrium. Most businesses make decisions not only about how many workers to employ at any given point in time (i.e. the amount of labor) but also about what scale of an operation (i.e. size of factory, office, etc.) to put together and what production processes to use. In contrast, economists often define the short-run as the time horizon over which the scale of operation is fixed and the only available business decision is the number of workers to employ. Technically, the short-run could also represent a situation where the amount of labor is fixed and the amount of capital is variable, but this is fairly uncommon. The logic is that even taking various labor laws as given, it's usually easier to hire and fire workers than it is to significantly change a major production process or move to a new size of factory or office. In the short-run, one factor of production is fixed, e.g. capital. This means that if a firm wants to increase output, it could employ more workers, but not increase capital in the short-run (it takes time to expand.) Therefore in the short-run, we can get diminishing marginal returns, and marginal costs may start to increase quickly. Also, in the short-run, we can see prices and wages out of equilibrium, e.g. sudden rise in demand, may lead to higher prices, but firms don't have the capacity to respond and increase supply.

Tejvan Pettinger. (2015). Short-run, long-run, very long-run. Glossary Terms. Economics help blog. NY: Helping to Simplify Economic.
Retrieved from: http://www.economicshelp.org/blog/glossary/short-run-long-run-very-long-run/
Short-Run. Short-Run Definition | Investopedia
Retrieved from http://www.investopedia.com/terms/s/shortrun.asp#ixzz4KO1YXsri

I need a peer reply for this, please.

taupeswan96

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c

The short-run cost function is: (Points : 1)

a. where all inputs to the production process are available
b. relevant to decisions in which one or more inputs to the production process are fixed
c. not relevant to optimal pricing and production output decision facilities
d. crucial in making optimal investment decisions in new production facilities
e. none of the above

Theoretically, in a long-run cost function: (Points : 1)

a. all inputs are fixed
b. all inputs are considered variable
c. some inputs are always fixed
d. capital and labor are always combined in fixed proportions

A linear total cost function implies that: (Points : 1)

a. marginal costs are constant as output increases
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above

Question 16

If price is cut and demand is elastic, total revenue will rise because

		the change in quantity demanded is greater than the percent change in price.
		the percent change in quantity demanded is greater than the change in price.
		the percent change in quantity demanded is greater than the percent change in price.
		customers can't find substitutes.

3 points

Question 17

If price is cut and demand is inelastic, total revenue will fall because

		the change in quantity demanded is less than the percent change in price.
		the percent change in quantity demanded is less than the change in price.
		the percent change in quantity demanded is less than the percent change in price.
		customers can find substitutes.

3 points

Question 18

If something is addictive, then

price and demand are inversely related.

price elasticity of demand is equal to one.

demand is perfectly inelastic.

demand is perfectly elastic.

3 points

Question 19

In general, elasticities measure

		the change in quantity demanded when a product attribute changes.
		the change in consumer spending when income changes.
		the change in an attribute for a percentage change in price.
		the percentage change in the quantity demanded resulting from a fixed percentage change in some attribute.

3 points

Question 20

Average total costs are defined as

total costs divided by the change in output.

total costs divided by output.

the change in total costs when output changes.

average variable costs plus marginal costs.

3 points

Question 21

If a firm is experiencing economies of scale, then the long-run average cost curve is

falling.

rising.

horizontal.

shifting.

3 points

Question 22

If average total cost is rising

marginal cost is above average total cost.

marginal cost is rising.

marginal product is rising.

marginal cost is above average total cost and is falling.

3 points

Question 23

The period of time over which all inputs are variable is the

market horizon.

short run.

calendar year.

long run.

3 points

Question 24

The supply chain refers to

the supply curve.

the process of outsourcing.

the process of downsizing.

the process of creating and selling a product.

3 points

Question 25

When the capital (a fixed input) changes

short-run marginal costs rise.

short-run average total costs fall but do not shift.

labor inputs decline.

the short-run average total cost curve shifts.

3 points

Question 26

A market of price takers is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 27

A market with a single seller is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 28

A market that mainly stresses product differentiation is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 29

Entry into a competitive market will continue until

economic profits are zero.

normal profits are zero.

when accounting losses are zero.

a. and b. are true

3 points

Question 30

Firms in an oligopoly

act independently.

engage in strategic behavior.

have perfect knowledge of the behavior of others.

openly collude.

ECON 102 Lecture Notes - Lecture 17: Masonry Oven, Binary Relation, Marginal Product

ECON 102 Full Course Notes

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Related Questions

		price and demand are inversely related.
		price elasticity of demand is equal to one.
		demand is perfectly inelastic.
		demand is perfectly elastic.

		total costs divided by the change in output.
		total costs divided by output.
		the change in total costs when output changes.
		average variable costs plus marginal costs.

		marginal cost is above average total cost.
		marginal cost is rising.
		marginal product is rising.
		marginal cost is above average total cost and is falling.

		the supply curve.
		the process of outsourcing.
		the process of downsizing.
		the process of creating and selling a product.

		short-run marginal costs rise.
		short-run average total costs fall but do not shift.
		labor inputs decline.
		the short-run average total cost curve shifts.

		perfectly competitive.
		monopolistically competitive.
		a monopoly.
		an oligopoly.

		economic profits are zero.
		normal profits are zero.
		when accounting losses are zero.
		a. and b. are true

		act independently.
		engage in strategic behavior.
		have perfect knowledge of the behavior of others.
		openly collude.

		falling.
		rising.
		horizontal.
		shifting.

		market horizon.
		short run.
		calendar year.
		long run.