ECO200Y5 Lecture Notes - Lecture 7: Marginal Cost, Marginal Product, European Route E20

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11 Feb 2016

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Marginal product of labour means the amount of output that can be produced by one additional unit of l while all other inputs are held constant. Marginal product of capital means the amount of output that can be produced by one additional unit of k while all other inputs are held constant. Marginal rate of technical substitution (rts) rate at which some of k is given up to obtain more of l with output held constant. Rts is the negative slope of the isoquant curve. Economic profit total revenue total cost. Accounting cost direct cost of running a business including cost of raw materials. Accounting profit total revenue accounting costs. As long as mc of producing one more unit is below average cost curve, average costs will be falling. If marginal cost of producing one more unit is higher than the average cost, then the average costs will be rising.

Related Questions

A firm has a production function Q=F(K, L) with the constant return to scale, where k is units of capital and L is united of labour. Input prices are r=$2 per unit of K and w=$1 per unit of L. When it produces 5 units of output, it uses 2 units of capital and 3 units of labour. When its long-run total cost is equal to $70, how much capital and labour it will employ to product how many units of output? What is the long-run average cost?

lavenderwolf32

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

The following table summarizes the short-run production function for your firm. Your product sells for $6 per unit, labor costs $6 per unit, and rental price of capital is $10 per unit. Complete the following table, and then answer the accompanying questions.

K L Q MPK APK APL VMPK

5 1 0

5 2 5

5 3 10

a. Which inputs are fixed inputs?

b. Which are the variable inputs?

c. How much are your fixed costs?

d. What is the variable cost of producing 10 units of output?

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ECO200Y5 Lecture Notes - Lecture 7: Marginal Cost, Marginal Product, European Route E20

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