FARE 1400 Study Guide - Midterm Guide: Cash Flow, Takers, Net Present Value

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rosecockroach492

3 Apr 2016

School

University of Guelph

Department

Food, Agricultural and Resource Economics

Course

FARE 1400

Professor

Alfons Weersink

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Document Summary

Y=f (x, z) where y stands for output and x stands for input (used more in unit two) Firm: a business organization that combines or transformers resources into goods or services to make a profit. Production function: shows the maximum amount of output that can be produced from given levels of inputs. Represented by a table, a graph or an equation. Total physical product: total amount of output produced at that given level of input. Average physical product: the average amount of product produced at that given level of input. Marginal physical product: the overall increase by adding one extra unit of labor. Eventually starts to shrink leading to diminishing marginal returns. Three stages of production: difference between levels of app and mpp, helps the firm decide where they should produce to maxim profit. Isoquant: the production function for two given inputs and a fixed output level.

Related Questions

Each unit of input, X, costs $10. Fixed costs are $50, regardless of the level of output.

a.Complete the table below.

Labor, X	Total Output (TPP)	Marginal Physical Product (MPP)	TFC	TVC	TC	AFC	AVC	ATC	MC/unit
0	0
1	15
2	45
3	70
4	90
5	105
6	110
7	112

b.If the product can be sold for $0.75 per unit, what is the optimal level of output?

C. Find the level of profit at the optimal level of output. Explain what would happen if the firm produced one more unit of output in terms of marginal cost and marginal revenue.

1. The slope of the total product curve measures

a. the marginal rate of technical substitution.

b. marginal product.

c. average product.

d. the maximum average product.

e. minimum product.

2. The Law of Diminishing Returns to a variable input (such as labor) assumes that

a. there is at least one fixed input.

b. all inputs are changed by the same percentage.

c. the firm is operating in the short run.

d. all inputs are held constant.

e. a and c.

3. An isoquant curve identifies

a. the maximum output possible, given a fixed budget.

b. the different combinations of goods the can be produced, given fixed amounts of inputs.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

d. none of the above.

4. The ratio of total productivity to the total quantity of a variable input being used in production is

a. equal to marginal physical productivity of the input.

b. constant as employment levels of the input vary.

c. equal to average physical productivity of the input.

d. equal to the marginal rate of technical substitution.

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