ECON101 Lecture Notes - Lecture 17: Externality, Horse Length, Social Cost
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21 Oct 2016
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As more of a variable input is added to the production process, holding the quantities of all other inputs constant, the resulting increase in quantity will, at some point, begin to diminish. Accounting costs - include actual expenditures and depreciation expenses for capital equipment. Economic costs = accounting costs + opportunity costs. Note: private costs do not include external costs. There"s a split between social costs and private costs ex. The external cost of production of some good is air polution - a social cost (spills over to society) Costs in the short run (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) (cid:12254) Recall that we talked about how there are fixed and variable inputs in the short run. There are also fixed costs and variable costs. Fixed costs: costs that do not change as the quantity of output changes.
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Related Questions
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
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 |
b. the marginal rate of technical substitution c. equal to MPx/MPy d. all of the above e. none of the above |
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 |
b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above |
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 |
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 |
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) |
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above