MGEB02H3 Chapter Notes -Substitute Good, Isoquant, Diminishing Returns

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lavenderdonkey6

5 Dec 2010

School

UTSC

Department

Economics for Management Studies

Course

MGEB02H3

Professor

A.Mazaheri

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Document Summary

N materials include steel, plastics, electricity, water, and any other goods that the firm buys and transforms into final products. N when capital is fixed but labour is variable, the only way the firm can produce more output is by increasing its labour input. N average product output per unit of a particular input (apl); calculated by dividing the total output q by total input of labour l. N average product of labour measures productivity of workforce in terms of how much output each worker produces on average. N marginal product additional output produced as an input is increased by one unit (mpl); can be written as q/l in other. N when the marginal product is greater than the average product, the average product is increasing. N when the marginal product is less than the average product, the average product is decreasing.

Related Questions

Consider a profit-maximizing firm with the following production function: f(ï¨x1,x2) = ½x1x2.

The prices of the two inputs are equal to w1= 4 and w2= ½ 2, respectively

.a) What are the returns-to-scale properties of the firmâs production technology. Prove your answer.

.b) What input combination should the firm use to produce Q units of output?

.c) What is the firm's total cost of production as a function of the amount of output, Q?

.d) What is its marginal and average cost of production?

.e) Suppose the price of the first input falls to $2. What input combination should the firm use

now to produce Q units of output? What is its total, marginal, and average cost of production?

lemoncricket14

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.

Consumers have to make tradeoffs in deciding what to consume because...

A) They are limited by budget constraints.

B) The prices of goods vary.

C) There are not enough of all goods produced

D( Not all goods give them the same amount of satisfaction

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MGEB02H3 Chapter Notes -Substitute Good, Isoquant, Diminishing Returns

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