ECO 201 Chapter Notes - Chapter 11: Average Variable Cost, Average Cost, Fixed Cost

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7 Apr 2016

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Fixed input: input whose quantity is fixed for a period of time and cannot be varied. Variable input: input whose quantity the firm can vary at any time. Long run: time period where there are no fixed inputs. Short run: time period where there is at least one fixed input and variable inputs. The short run is as long as the time that there are fixed inputs. Marginal product: an input is the additional quantity of output that is produced by using one or more unit of input. Diminishing returns to an input: when an increase in the quantity of that input, holding the quantity of all other fixed inputs, reduces the input"s marginal product. Fixed cost: cost that doesn"t depend on the quantity of output produced. Variable cost: cost that depends on the quantity of output produced. Average total cost: total cost divided by the quantity of output produced. Average fixed costs: represented by a horizontal line.

Related Questions

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 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.

lemonelephant20

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.

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ECO 201 Chapter Notes - Chapter 11: Average Variable Cost, Average Cost, Fixed Cost

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