ECON 102 Lecture Notes - Lecture 17: Masonry Oven, Binary Relation, Marginal Product
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A process of combining resources (inputs) and transforming them into products (outputs) It shows the maximum output that can be produced with a given amount of inputs. How much outcome you have is also dependent on your level of technology. So more tech is higher output so this depends on inputs and tech. Q = f(l,k) q is output, l labor and k capital. In the short run, k is fixed therefore, q=f(l,k) [the bar means fixed] If you hire more labor but capital is fixed, your return from the production starts diminishing because you"re paying them more but they"re working with a fixed amount of inputs. Output depends on labor (because it"s the only thing that"s changing) Marginal product: amount of product you get from hiring additional labor. Difference between marginal product and marginal utility product increases at first and then decreases.
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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