EC120 Chapter Notes - Chapter 18: Marginal Revenue, Marginal Product, Demand Curve

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16 Feb 2017

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Document Summary

Capital: eco(cid:374)o(cid:373)y"s stock of e(cid:395)uip(cid:373)e(cid:374)t a(cid:374)d st(cid:396)uctu(cid:396)es. De(cid:396)ived de(cid:373)a(cid:374)d: fi(cid:396)(cid:373)"s de(cid:373)a(cid:374)d fo(cid:396) a facto(cid:396) of p(cid:396)oductio(cid:374) is de(cid:396)ived f(cid:396)o(cid:373) its decisio(cid:374) to supply. Factors of production: inputs used to produce goods and services a good in another market. The production function and the marginal product of labour. Production function: relationship between the quantity of inputs used to make a good and the quantity of output of that good. Marginal product of labour: increase in the amount of output from an additional unit of labour. Diminishing marginal product: property whereby the marginal product of an input declines as the quantity of input increases. The value of the marginal product and the demand for labour. Value of the marginal product: the marginal product of an input times the price of the output. Marginal revenue product: extra revenue the firm gets from hiring an additional unit of a factor of production.

Related Questions

23. Diminishing marginal returns means that: a. as more capital is used in production, but the labour input is held constant, MPK falls. b. as labour increases and capital decreases for a given level of output, the marginal product of labour divided by the marginal product of capital increases. c. if capital and labour inputs double, output increases by less than double. d. a and c e. a and b.

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