ECN 121 Chapter Notes - Chapter 11: Production Function, Diminishing Returns, Marginal Cost

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olivedolphin875

4 Oct 2016

School

University of Portland

Department

Economics

Course

ECN 121

Professor

Hanig Ross

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Document Summary

Explain what each of the following terms mean: a production function, fixed input, variable input, long run, short run, and total product curve. Production function: relationship between the quantities of inputs a firm and the quantity of output it produces. Fixed input: an input whose quantity is fixed for a period of time and cannot be varied. Variable input: an input whose quantity the firm can vary at any time. Long run: a time period in which all can be varied. Short run: a time period in which at least one input is fixed. Total product curve: shows how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed output. Distinguish the difference between, calculate, and graph the total and marginal product. Identify the factors that cause productivity to change/shift and show these shifts graphically on both a graph of total and marginal product.

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.

A fi? rm produces a product with labor and capital. Its production function
is described by Q = 2L + 3K: Let w and r be the prices of labor and capital,
respectively.

(a) Find the equation for the? firm's long-run total cost curves as a function
of quantity Q, for input prices, w = 1 and r = 1.

(b) Find the equation for the firm's long-run total cost curves as a function of
quantity Q and input prices, w and r (and so as a function of three parameters).

c) Find the solution to the ?firm's short-run cost-minimizationproblem when
capital is fi?xed at a quantity of 5 units (i.e., K = 5), and w = 1and r = 1.
Derive the equation for the? firm's short-run total cost curve as a function of
quantity Q. Graph this curve together with the long-run total cost curve for
the same input prices.

(d) Redo parts a) and c) for w = 1 and r = 2:

peachhound332

Given the following short-run production cost schedule:

Quantity Produced	Total Cost ($)
0	20
1	27
2	38
3	53
4	73
5	100
6	130

The table above gives the short-run total cost function for a typical firm in a perfectly competitive industry.

(a) What is the dollar value of the firm's total fixed cost?

(b) Calculate the marginal cost of producing the first unit of output.

(d) Explain your answer in (c) above.

(e) Given your results, what will happen to the number of firms in the industry in the long-run (assuming there is no barrier to entry). Explain.

(f) Input the above data in excel and draw, using excel, the (1) total cost, (2) fixed cost, and (3) average variable cost curves for the above firm.

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ECN 121 Chapter Notes - Chapter 11: Production Function, Diminishing Returns, Marginal Cost

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