ECON 102 Lecture Notes - Lecture 16: Fixed Cost, Marginal Product

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jadeworm431

17 Dec 2015

School

University of Illinois

Department

Economics

Course

ECON 102

Professor

Isaac Dilianni--- Universityof Illinois

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ECON 102 Full Course Notes

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Document Summary

Price: the amount of money the buyer has to spend to buy it from the seller. Cost: the amount of money the seller has to spend to produce it. Total cost: the cost of producing a certain quantity of units of a good. Fixed costs: costs that do not vary with the quantity of units produced. Variable costs: costs that vary with the quantity of units produced. Marginal cost: the cost of producing one more unit of a good. Law of diminishing marginal returns: with a fixed input, and an increasing variable input, at some point the marginal product of the variable input must decline. Marginal product: the additional output produced when one more unit of variable input is added. Increasing marginal returns: the range of input usage over which marginal product increases. Diminishing marginal returns: the range of input usage over which marginal product decrease. Average fixed costs: the total fixed cost divided by the quantity of units produced.

Related Questions

1. If marginal cost is less than average total cost, then:

A. average total cost is increasing with output.
B. average total cost is decreasing with output.
C. average variable cost is increasing with output.
D. average variable cost is decreasing with output.

2. The law of diminishing marginal productivity:

A. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will fall.

B. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will rise.

C. explains why marginal costs of production fall as additional units of output are produced.

D. explains why average productivity always rises.

azuremuskrat765

As long as profits remain positive, a firm will want to increase the quantity produced.

Question 3 options:

	1) True
	2) False

Question 4 (1 point)

Only variable costs are relevant to a firm's decision to shut down.

Question 4 options:

1) True

2) False

A competitive firm faces a downward-sloping demand for its product.

Question 1 options:

1) True

2) False

If a firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits, it should

Question 10 options:

1)	continue to produce this quantity.

2)	decrease the quantity produced because doing so will increase profit.

3)	increase the quantity produced because profits are still positive.

wait for the price to increase to its current marginal cost.

Ultimately, short-run supply curves are upward sloping because of

Question 12 options:

1)	the irrelevance of fixed costs to the firm's decision making.

2)	the factor-price effect.

3)	diminishing marginal returns to the variable inputs.

4)	the equality of demand and marginal revenue for competitive firms.

olivesardine69

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