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ECON 2000 : ECON 2001 TEST 2 Notes

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azuremammoth471
15 Mar 2019
School
LSU
Department
Economics
Course
ECON 2000
Professor
All

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Document Summary

A production function indicates the maximum amount of output that can be produced with different combinations of inputs. As the variable input is increased, more output is produced. This is measured by marginal physical product (mpp): 07-02. Know how the law of diminishing returns applies to the production process. As returns diminish and mpp declines, marginal cost (mc) increases: 07-03. Describe how the various measures of cost are related. Total costs equal total fixed costs plus total variable costs. Average costs are calculating by dividing each of the above by quantity produced: atc = tc/q; afc = fc/q; avc = vc/q. Mc intersects atc at its minimum point: 07-04. Discuss how economic and accounting costs are different. Economic costs include the value of all resources used: they equal the sum of explicit costs and implicit costs. Accounting costs include only those dollar costs actually paid: they equal explicit costs only, 07-05.

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Related Questions

The law of diminishing marginal returns states

A) that at some point adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline.

B) that at some point adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added.

D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

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.

 

Diminishing marginal returns means that as you combine more units of a variable resource with a set of fixed resources:

a. the marginal physical product of the variable input decreases.

b. the average physical product of the fixed inputs increases at an increasing rate.

c. the marginal physical product of the variable input increases at a decreasing rate.

d. the total output decreases.

e. the marginal physical product of the variable input increases at a constant rate.