ECON 160 Chapter Notes - Chapter 13: Marginal Product, Marginal Cost, Production Function

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redhyena35

12 Dec 2016

School

Binghamton University

Department

Economics

Course

ECON 160

Professor

Susan W.Hanes

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Document Summary

Total revenue (tr): the amount a firm receives for the sale of its output. Total cost (tc): the market value of the inputs a firm uses in production. Explicit costs: input costs that require an outlay of money by the firm. Implicit costs: input costs that do not require an outlay of money by the firm. Total cost is explicit costs plus implicit costs. Production function: the relationship between quantity of inputs used to make a good and the quantity of output of that good. The normal input to use in this relationship is labor. Marginal product: the increase in output that arises from an additional unit of input. Diminishing marginal product: the property whereby the marginal product of an input declines as the quantity of the input increases. The production function begins to flatten due to diminishing marginal product. Total-cost curve: the relationship between the quantity produced and the total cost.

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

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

The short-run cost function is: (Points : 1)

a. where all inputs to the production process are available
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

Theoretically, in a long-run cost function: (Points : 1)

a. all inputs are fixed
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)

a. marginal costs are constant as output increases
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above

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.

Suppose that a fully automated production process can produce output according to the production function Q = 10K – 0.5K² where Q = output and K = capital input. Assume further that the expression for the marginal product of capital, MPK, is given as MPK = 10 – K. In this production process capital costs $90 to rent (MFC = $90) and the output sells for $30 per unit (and therefore P = MR = $30).

a. Based on this information, what is the expression for the marginal revenue product of capital, MRPK in this production process?

b. Given that the production function has a single variable input, what is the optimal quantity of capital the firm should rent (K*) given the existing rental cost of capital and price per unit of output?

c. Based on the optimal rental of capital, how much output (Q) would this company produce per production period? Total Output (Q) = ____________________.

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ECON 160 Chapter Notes - Chapter 13: Marginal Product, Marginal Cost, Production Function

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