MGEA02H3 Chapter 11: Chapter 11 Notes (Cont)
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20 Jul 2015
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Chapter 11 behind the supple curve: inputs and costs. Two key concepts: marginal cost and average cost. Marginalcost =change total cost generated byone additional nit of ouput= Average total cost: average total cost, often referred to simply as average cost, is total cost divided by quantity of output produced. = fc q: average variable cost, or avc is the variable cost per unit of output. Each additional unit of output incurs more variable cost to produce that the previous unit: variable cost rises at a faster rate than the quantity of output increases. Increasing output has two opposing effects on average total cost: the spreading effect. The larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost: the diminishing return effect. Short-run versus long-run costs: all inputs in are variable in the long run, in the long run, fixed cost may also be varied.
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Related Questions
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
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