UNIT 5: PRODUCTION

Question 1

What is a production function?

Answer 1

The relationship between quantity of input, a firm uses in the quantity of output it produces

Question 2

What is the difference between a fixed and a variable input?

Answer 2

FIXED: an input who is quantity is fix for a period of time, and cannot change

VARIABLE: an input whose quantity can vary at any time

Question 3

“ always one thing is fixed”
IS THIS A SHORT OR LONG RUN?

Answer 3

Short run

Question 4

What is marginal product?

Answer 4

The change in input resulting from one extra unit of increase in the amount of outfit

Question 5

Explain why the marginal cost curve is upward sloping

Answer 5

Diminishing Returns To Input:

as output increases, the marginal product of the variable input declines

implies more of a variable input must be used to produce each additional unit of output

Since each unit of the variable input must be paid for, the cost per additional unit of output also rises.

Question 6

Explain the spreading effect

Answer 6

The larger the output, the more output over which fixed cost is spread,

therefore a lower average fixed cost