MGEC34H3 Lecture Notes - Lecture 2: Air Quality Index, Victor Fuchs, Dengue Fever

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lemonmammoth411

20 Sep 2016

School

UTSC

Department

Economics for Management Studies

Course

MGEC34H3

Professor

Michele Campolieti

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Document Summary

September 13, 2016 lecture 2: production of health. Government has control of characteristics of the health market. Production function of health: the production function of health defines the relationship health and the health inputs needed to produce health. Health status increases as more health care inputs are added to the production process: increase input = increase in health status. Marginal product: diminishing marginal product as more and more health care inputs are added to the production process, the increments in health status diminish, diminishing marginal product: scarcity, marginal product is important. It would be better to reduce health expenditure by billion and invest those funds in another productive use, such as housing, environmental programs, and education: extra dollars should go where the marginal product is the highest. As health care spending increases, the marginal product falls. Production function f health: health= f(medical care, lifestyle, environment, human biology, produce health with inputs: medical care, lifestyle, environment, and human biology.

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

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

MULTIPLE CHOICE.

1) Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?

A) The AP curve intersects the MP curve at minimum MP.

B) If MP is less than AP, then AP is increasing.

C) If MP is greater than AP, then AP is falling.

D) The MP curve intersects the AP curve at maximum AP.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

2) If, for a particular short-run production, we observe that marginal product is decreasing we can conclude that average product is decreasing as well.

MULTIPLE CHOICE.

3) An implicit cost is defined as:

A) the amount by which the money spent on an input to production exceeds its opportunity cost.

B) the difference between an input's explicit cost and its actual cost.

C) the opportunity cost of using a resource that is not explicitly paid out by the firm.

D) the amount by which economic profit exceeds accounting profit.

MULTIPLE CHOICE.

4) The amount of output a firm can produce with a given quantity of fixed and variable inputs is called:

A) total fixed product.

B) average variable product.

C) marginal product.

D) total product.

5) Which of the following statements is true of the relationship among the average cost functions?

A) AFC = ATC + AVC

B) ATC = AFC - AVC
C) AVC = AFC + ATC

D) AFC = ATC - AVC

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

6) A firm's production function is the relationship between the factors of production and the resulting outputs of the production process.

MULTIPLE CHOICE.

Scenario 2:
Output (Q): 0 1 2 3 4 5 6

Total Cost (TC): $24 $33 $41 $48 $54 $61 $69

7) Refer to Scenario 2. Diminishing marginal returns starts to occur between units:

A) 2 and 3.

B) 3 and 4.

C) 4 and 5.

D) 5 and 6.

8) Which of the following would be classified as a short-run decision?

A) trucking firm's decision to move to a smaller facility.

B) A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.

C) A university's decision to add a new residence hall.

D) A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room.

9) Economic profit is equal to the difference between: 9)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

10) At the point where a firm incurs diminishing marginal returns, total product will begin to decline.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

11) In the context of a production function, the remote order takers in the fast food industry would be classified as:

A) a fixed input.

B) a marginal input.

C) an inframarginal input.

D) a variable input.

Scenario 3:
Total Product (Q): 0 1 2 3 4 5 6

Total Cost (TC): $50 $80 $105 $125 $155 $195 $250

12.

13.

increase; lower

decrease; lower

increase; higher

decrease; higher

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

14.

15.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

16) A labor-intensive method of production is one that:
A) combines a small but sophisticated labor force with a large amount of capital.

B) requires employees to work harder than they would in other occupations.
C) relies on large quantities of labor and smaller quantities of capital equipment. D) relies exclusively on labor.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

17) Assume a firm produces 500 units of a good by using two inputs, capital and labor, whose per unit prices are $10 and $4. Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10. To minimize costs this firm should employ:

A) more labor and less capital. B) more capital and less labor.
C) the existing combination of resources. D) both more labor and more capital.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

18) All else constant, a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm's production process.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

19) All else constant, as the price of petroleum increases relative to the prices of other inputs to the production process, in their effort to minimize their total costs of production, we can expect to see firms employ:

A) the same amount of petroleum since there are no substitutes for petroleum. B) less petroleum and more of the other inputs to production.
C) less of each of the inputs of production.

D) more petroleum and less of the other inputs to production.

coffeewoodchuck827

Multiple Choice:

1. If 8 percent increase in the price of one good results in an increase of 4 percent in the quantity

demanded of another good, then it can be concluded that the two goods are:

a) complements.

b) substitutes.

c) independent.

d) normal.

2. The law of diminishing marginal utility explains why:

a) supply curves are upsloping.

b) demand curves are downsloping.

c) real income of the consumer rises when the price of a commodity falls.

d) substitution effect is always higher than income effect mentioned in c) above.

3. A necessary and sufficient condition for a rational consumer to be in equilibrium or at that position where he

maximizes utility is that the marginal utility:

a) of all products he consumes is zero.

b) of all products he consumes is positive.

c) is the same for all products.

d) per last dollar is the same for products consumed.

4. Diminishing returns are observed in increases of production output by adding a variable input to a fixed of

inputs because:

a) the ability or quality of the variable input added decreases are more is used.

b) the firm must lower the price of its product when it produces more units of output.

c) the per unit cost it must pay for the variable input increases as more of the input is used.

d) as more variable input is used, the amount of fixed input per variable input decreases.

5. A necessary and sufficient condition for a rational consumer to be in equilibrium or at that position where he

maximizes utility as he spends the last dollar of his budget is that the marginal utility:

e) of all products he consumes is zero.

f) of all products he consumes is positive.

g) is the same for all products.

h) per dollar for all products is the same.

6. The short run marginal cost (MC) curve eventually rises because of:

a) diseconomies of scale.

b) decreasing per unit fixed costs.

c) diminishing marginal returns.

d) increasing marginal productivity of the variable input.

7. Other things being equal, if the prices of a firm

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MGEC34H3 Lecture Notes - Lecture 2: Air Quality Index, Victor Fuchs, Dengue Fever

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