ECON 305 Chapter Notes -Marginal Product, Real Wages, Demand Curve
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11 Mar 2014
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National income: where it all comes from and where it goes. Factors of production: inputs used to produce goods and services. Capital: set of tools that workers use (k) Both are fixed (bar over) and none wasted. Production function: shows how the quantities of fop"s determine the quantity of goods and services produced. Output is a function of the amount of capital and labor. Available technology for turning capital and labor into output. Constant returns to scale: an increase of an equal percentage in all fop"s causes an increase in output of the same percentage. zy = f ( zk , zl) Factor prices: amounts paid to the fop"s for labor and capital they are wages and rent. Competitive firm: small relative to the markets in which it trades, so it has little influence on the market prices. Uses market prices because otherwise they would go out of business from other firms.
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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