ECON101 Lecture Notes - Lecture 22: Isoquant, Marginal Cost
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26 Nov 2016
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All factors of production in the long run are variables. Best factor combination- the combination of inputs, that will produce a single firms desired level of output at the lowest possible cost. The best factor combination is the economically most efficient method of production. The economically most efficient method of production is obtained by combining in the two concepts isoquants and iso cost lines. An isoquant is a curve representing combinations of inputs, that will produce a desired level of output. Example: when we consider isoquants we work with input 1 and input 2. Throughout the range of the isoquant we have a constant range of output. Each point on the isoquant line represents a combination of inputs e. g. labour and capital capable of producing that constant level of output. Iso cost lines- an iso cost lines represents combinations of inputs that a firm can acquire or purchase for a given cost out lay.
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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