ECON 1281 Lecture Notes - Lecture 3: Income Statement, Marginal Product, Diminishing Returns

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orangemallard165

15 Nov 2016

School

Northeastern University

Department

Economics

Course

ECON 1281

Professor

Wassall Greg

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Document Summary

Advanced production and cost issues in art, culture and entertainment. Types of cost short and long run. Sunk vs. fixed cost - a clarification. Long vs. short run in the performing and entertainment industries. Scale economies in art, culture and entertainment. Short run: at least one input is fixed in amount. Long run: all inputs can be varied no fixed inputs, quantity of all inputs and outputs can be changed. Sub-optimal decisions will be made in the short run the amount of the fixed input cannot be adjusted to accommodate changes in demand. The length of time spent in a short run and a long run is a function of technology and contractual obligations, and varies across industries. Normally we portray fixed costs as capital costs a machine, a factory building, a restaurant location rental, etc. (machinery, equipment, real estate) Normally we portray variable costs as labor costs waiters, assembly line workers, etc.

Related Questions

Consider Patâs Pizza Restaurantâs production decision in both the short-run and longârun. Pat wants to improve the productivity of the firm in the long run. Explain the types of input costs that might be fixed in the shortârun and types of costs that may be variable in the longârun. Provide examples for fixed inputs and variable inputs as well as fixed costs and variable costs for the Restaurant in the short run. What long run economic decisions should Pat make to increase productivity, minimize costs, and maximize profit?

Marginal Product of Capital	4,000
Marginal Produce of Labor	100
Wage Rate	$10
Rental Price of Pizza Ovens	$500

constant costs

increasing returns to scale

constant returns to scale

isocost curve

decreasing returns to scale

isoquant

diseconomies of scale

long-run average cost

economies of scale

long-run marginal cost

economies of scope

marginal rate of technical substitution

expansion path

short-run expansion path

___A curve that displays all the various combinations of inputs that will produce a given amount of output.

___The rate at which one input is substituted for another along an isoquant.

___Line that shows all the possible combinations of inputs that can be purchased for a given total cost.

___A curve showing all of the cost-minimizing levels of input usage for various levels of output.

___When the usage of all inputs is increased by an equal proportionate amount, output ___increases by exactly the same proportion.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a larger proportionate amount.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a smaller proportionate amount.

___Cost per unit in the long run.

___The change in long-run total cost per unit change in output.

___When long-run average cost falls as output increases.

___When long-run average cost increases with increases in output.

___Long-run average and marginal costs are equal for all levels of output.

___The situation in which the joint cost of producing two goods is less than the sum of the separate costs of producing the two goods.

___Horizontal line showing the cost-minimizing input combinations for various output levels when capital is fixed in the short run.

aquamarineguinea-pig889

36) A firm encountering economies of scale over some range of output will have a:

a) rising long-run average cost curve.

b) falling long-run average cost curve.

c) constant long-run average cost curve.

d) rising, then falling, then rising long-run average cost curve.

37) When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) a violation of the law of diminishing returns.

38) The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:

a) economies of scale.

b) normative economies.

c) diminishing marginal returns.

d) an increasing marginal product of labor.

39) If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) increasing the average total costs.

40) Economies and diseconomies of scale explain why the:

a) short-run average fixed cost curve declines so long as output increases.

b) marginal cost curve must intersect the minimum point of the firm's average total cost curve.

c) long-run average total cost curve is typically U-shaped.

d) short-run average variable cost curve is U-shaped.

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ECON 1281 Lecture Notes - Lecture 3: Income Statement, Marginal Product, Diminishing Returns

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