Week 3

Question 1

firm

Answer 1

organisation that coverts inputs into outputs

Question 2

for profit firm

Answer 2

owned by individuals and try to make a profit

Question 3

public firm

Answer 3

owned by gov

Question 4

non profit

Answer 4

not intended to make profit

Question 5

sole proprietor

Answer 5

owned by single individual

Question 6

general partnership

Answer 6

business jointly owned or controlled by two or more people operating under partnership

Question 7

corporations

Answer 7

shareholders and limited liability

Question 8

Technology

Answer 8

what a firm uses to transform inputs of production into outputs

Question 9

production function

Answer 9

relationship between quantities of inputs used a max quantity of output that can be produced given current knowledge about technology and organisation

Question 10

total product of labour

Answer 10

amount of output or total product that can be produced by a given amount of labour

Question 11

Marginal Product of Labour

Answer 11

how much output each additional worker can produce

Question 12

Average product of labour

Answer 12

spreading out the output evenly cross all workers

Question 13

Why does APL rise and then fall

Answer 13

output rises more than in proportion because it helps have more labour but as number of workers rises further output may not increase by as much per worker

Question 14

Law of Diminishing Marginal Returns

Answer 14

determines the shape of the total product curve and mil curve as the firm uses more and more labour
it holds that as firm keeps increasing input, holding all other inputs and technology constant the increasing output will eventually become smaller

Question 15

Difference between diminishing marginal returns and diminishing returns

Answer 15

with diminishing as mph begins to fall total product is still rising
with diminishing retunes, extra labour causes output to fall

Question 16

Difference between isoquant and indifference curve

Answer 16

isoquant holds output constant
indifference curve holds utility constant

Question 17

properties of isoquant

Answer 17

1. the farther isoquant is from origin the higher the output
   the more inputs used the more output
2. Isoqaunts do not cross
   inconsistent with firm producing efficiently
   3.Isoquant slope downward
   if it sloped up, the firm could produce the same level of output with relatively few inputs

Question 18

why are isoqaunts smooth curves

Answer 18

because firm can use fractional units of each input
shows the flexibility a firm has when producing a given level of output

Question 19

Marginal Rate of Technical Substitution

Answer 19

how many units of capital the firm can replace with an extra unit of labour
negative because isoquant slopes down
mpl/mpk=mrts

Question 20

Returns to Scale

Answer 20

by how much output changes if a firm increases all the outputs proportionately