ECO204Y1 Lecture Notes - Lecture 15: Isoquant, Consumer Choice, Marginal Product
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Lower case for fixed, upper case for variable. All bundles on same contour produce same level of output. Pmt will not yield another function representing same technological process. Optimal input expansion path shows optimal amounts of input at different production levels. Will only consider expansion paths with constant, positive, finite k/l ratios. More than doubles output, then increasing returns to scale. Less than doubles output, then decreasing returns to scale. Returns of scale describes what happens along any linear expansion path. When all inputs are increased by same proportion along arbitrary expansion path with constant positive k/l ratio. Economies of scale describes what happens along optimal expansion path. What happens to ac when all inputs are increased along optimal expansion path, which may have varying or constant k/l ratios. Economies of scale can happen without returns to scale. U-shaped long run ac curve cannot exist given a type of returns to scale.
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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