ECO100Y5 Chapter Notes - Chapter 8: Isocost, Isoquant, Marginal Product

71 views7 pages

orangezebra23

6 Oct 2017

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

sophiapham192 and 37296 others unlocked

ECO100Y5 Full Course Notes

Verified Note

53 documents

Document Summary

Technical efficiency when a given number of inputs are combined in such a way as to maximise the level output technical efficiency is not enough for profits to be maximised, however,. In order to maximise its profit, the firm must choose from among the many technically efficient options the one that produces a given level of output at the lowest cost. Profit maximisation and cost minimisation cost minimisation an implication of profit maximisation that firms choose the production method that produces many given level of output at the lowest possible cost. Whenever the ratio of the marginal product of each factor to its price is not equal for all factors, there are possibilities for factor substitutions that will reduce costs (for a given level of output) Profit maximising firms adjust the quantities of factors they use to the prices of the factors given by the market.

Related Questions

Which of the following shows the difference between technical efficiency and economic efficiency?

a. Technical efficiency in production means that the most technologically advanced machinery is used in the production of a good. Economic efficiency means using the method that produces the greatest profit for a given level of output.

b. Technical efficiency in production means that as few inputs as possible are used to produce a given output. Economic efficiency means using the method that produces a given level of output at the lowest possible cost.

c. Technical efficiency in production means that as few inputs as possible are used to produce a given output. Economic efficiency means using the method that produces the greatest profit for a given level of output.

d. Technical efficiency in production means that the most technologically advanced machinery is used to produce a good. Economic efficiency means using the method that produces a given level of output at the lowest possible cost.

champagnepanda184

What is the difference between technical efficiency and economic efficiency?

A. Technical efficiency in production means that the most technologically advanced machinery is used in the production of a good. Economic efficiency means using the method that produces the greatest profit for a given level of output.

B. Technical efficiency in production means that as few inputs as possible are used to produce a given output. Economic efficiency means using the method that produces a given level of output at the lowest possible cost.

C. Technical efficiency in production means that as few inputs as possible are used to produce a given output. Economic efficiency means using the method that produces the greatest profit for a given level of output.

D. Technical efficiency in production means that the most technologically advanced machinery is used to produce a good. Economic efficiency means using the method that produces a given level of output at the lowest possible cost.

blushraccoon42

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