EC120 Chapter Notes - Chapter 13: Marginal Product, Marginal Cost, Fixed Cost
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Industrial organization the study of how firms" decisions regarding prices and quantities depend on the market conditions they face. Total revenue-> the amount that the firm receives for the sale of its output. Total cost the amount that the firm pays to buy input. Firm"s cost of product include all the opportunity cost. Explicit cost input costs that require an outlay of money by the firm. (wages. ) Implicit cost input costs that do not require an outlay of money by the firm. ( time) accounting profit ignore this cost. Economic profits count both explicit cost and implicit cost. Profit a firm"s total revenue minus its total cost. The production function the relationship between the quantity of inputs (workers) and quantity of output (cookies). The marginal product the increase in the quantity of output obtained from one additional unit of that input.
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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