question
The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time
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A production function can best be described as which of the following?
question
5 floral arrangements in a day
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Marcus has four employees. The four employees produce 55 floral arrangements in a day. Marcus hires a fifth employee. The five employees produce 60 floral arrangements in a day. The fifth employee's marginal product is __________.
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As you increase the amount of a variable input, its marginal product eventually gets smaller.
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What does diminishing marginal productivity mean?
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200
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The production of 12,000 candy bars per day requires 60 workers. The average product of each worker is ______________ candy bars per day.
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Rise
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Currently, the marginal product of labor is 45 units per week. The average product of labor at the current level of output is 32 units per week. If the employer hires one more worker, the marginal product of labor will be 47 units per week. The average product of labor will ______________.
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12
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Fill in the missing value for A in the table below
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64
answer
Fill in the missing value for B in the table below
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30
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Fill in the missing value for C in the table below
question
Decrease; not change
explanation: The production function will not shift. Diminishing returns means that as output increases, due to an increase in the variable input alone, marginal product will decrease or diminish. It is a movement along the production function
explanation: The production function will not shift. Diminishing returns means that as output increases, due to an increase in the variable input alone, marginal product will decrease or diminish. It is a movement along the production function
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Diminishing marginal returns means that marginal product will eventually ______________ and the total product function will ______________ as production increases.
question
Increase
explanation: The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more)
explanation: The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more)
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If the quantity of an input is variable in the short run, its total cost will ______________ as output increases.
question
$25,000
explanation: $10,000 + $15,000 = $25,000
explanation: $10,000 + $15,000 = $25,000
answer
If at 500 units of output, total fixed cost is equal to $10,000 and total variable cost is equal to $15,000. Total cost is equal to _____.
question
$16,000
explanation: $28,500 - $12,500 = $16,000
explanation: $28,500 - $12,500 = $16,000
answer
At 1,000 units of output, the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. The variable cost of producing 1,000 units of output per week is equal to _____.
question
$50
explanation: ($55,500 - $55,000)/(1,010 - 1,000) = $500/10 = $50
explanation: ($55,500 - $55,000)/(1,010 - 1,000) = $500/10 = $50
answer
Consider this example: The total cost of producing 1,000 units of output is equal to $55,000 per week. The total cost of producing 1,010 units is equal to $55,500 per week. The marginal cost of increasing output from 1,000 units per week to 1,010 units per week is:
question
$20
explanation: ($6,100 - $6,000)/(505-500) = $100/5 = $20
explanation: ($6,100 - $6,000)/(505-500) = $100/5 = $20
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Alicia is currently spending $6,000 per week on total variable costs to produce 500 hats. To produce 505 hats per week she would have to spend $6,100 per week. The marginal cost per hat is ______.
question
$25
explanation: Total output changes by 8 scarves. Total cost changes by the weekly wage of one additional worker or $200. $200/8 = $25.
explanation: Total output changes by 8 scarves. Total cost changes by the weekly wage of one additional worker or $200. $200/8 = $25.
answer
Using the information from the table below, what is the marginal cost of increasing output from 32 to 40 knit scarves per week if the weekly wage is $200?
question
Fixed costs tend to dominate low levels of output and variable costs tend to dominate high levels of output
explanation: Because fixed costs do not change, average fixed costs will get smaller as output grows. This gives us the downward part of the "bowl." As output grows variable costs tend to increase (and if marginal costs are increasing, variable costs will grow faster than output) giving us the upward part of the "bowl."
explanation: Because fixed costs do not change, average fixed costs will get smaller as output grows. This gives us the downward part of the "bowl." As output grows variable costs tend to increase (and if marginal costs are increasing, variable costs will grow faster than output) giving us the upward part of the "bowl."
answer
What are two of the reasons that average cost tends to have a "bowl" shape?
question
10.0
explanation: $28,500 - $12,500 = $16,000; $16,000/$1,600 = 10
explanation: $28,500 - $12,500 = $16,000; $16,000/$1,600 = 10
answer
At 1,000 units of output the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. If labor is the only variable input and the weekly wage is $1,600, how much labor is being used produce 1,000 units of output?
question
$2.00
answer
Juan wants to increase production at his confection shop. If he hires one more worker, he can increase output by 100 candies per week. A confection worker's weekly wage is $200. Juan's marginal cost of increasing output by 100 candies per week is ______.
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Total cost divided by the total product.
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Average cost:
question
The total product divided by the number of units of a particular input used.
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Average product:
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The resources used to produce goods and services, often divided into three categories: labor, all the physical and mental inputs of people; capital, the machines, tools, buildings, and inventories; and land, the actual land used, including raw materials from land.
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Factors of production:
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The marginal product of an input will eventually decrease as more of that input is used. The law of diminishing marginal returns assumes that all other inputs remain constant.
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Law of diminishing marginal returns:
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A time period long enough that all inputs can be changed.
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Long run:
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The change in total costs that results from increasing total product by one unit (ΔTC/ΔQ).
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Marginal cost:
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The increase in output from using one more unit of an input while all other inputs are constant (ΔTP/ΔL).
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Marginal product:
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A function showing the maximum output for each specific combination of inputs, given technology.
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Production function:
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A time period in which at least one input cannot be changed.
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Short run:
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A shift in the production function, usually in the direction of a greater quantity of output at each level of input. Technological change may be the result of creation of new products, redesign of old products, or the creation of new methods of manufacturing.
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Technological change:
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The sum of total fixed cost and total variable cost.
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Total cost:
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The costs (prices multiplied by the amounts of inputs) of the inputs that are fixed. This is also the amount of cost when total product is zero. Total fixed costs are costs that do not vary as output changes.
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Total fixed costs:
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The total amount of output produced.
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Total product:
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For a given level of output, the costs (prices multiplied by the amounts of inputs) of the inputs that can be changed. These costs vary as output changes.
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Total variable costs:
question
Decreasing; increasing
explanation: The law of diminishing marginal returns states that if every other input is held constant, increases in the variable input will eventually result in smaller increases in output. Thus, marginal product eventually decreases. A decreasing marginal product means that a given change in input produces smaller additions to output. Thus, the cost of those additional units of output, the marginal cost, must increase.
explanation: The law of diminishing marginal returns states that if every other input is held constant, increases in the variable input will eventually result in smaller increases in output. Thus, marginal product eventually decreases. A decreasing marginal product means that a given change in input produces smaller additions to output. Thus, the cost of those additional units of output, the marginal cost, must increase.
answer
The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.
question
No
explanation: Changes in fixed costs do not change total variable costs. A change in the cost of variable inputs will change total variable costs.
explanation: Changes in fixed costs do not change total variable costs. A change in the cost of variable inputs will change total variable costs.
answer
Will a change in fixed costs change total variable cost?
question
Yes
explanation: A change in fixed costs changes average costs because average cost is total fixed cost plus total variable cost divided by amount of output. Thus, average cost will also change as fixed cost changes.
explanation: A change in fixed costs changes average costs because average cost is total fixed cost plus total variable cost divided by amount of output. Thus, average cost will also change as fixed cost changes.
answer
Will a change in fixed costs change average cost?
question
No
explanation: A change in fixed costs will only change total costs and average costs. Marginal cost is affected only by changes in variable costs.
explanation: A change in fixed costs will only change total costs and average costs. Marginal cost is affected only by changes in variable costs.
answer
Will a change in fixed costs change marginal cost?
question
The total cost curve
explanation: The slope of the total cost curve is the change in total cost divided by the change in total product and thus is equal to the increase in total cost caused by an increase of one unit of output. That is the definition of marginal cost.
explanation: The slope of the total cost curve is the change in total cost divided by the change in total product and thus is equal to the increase in total cost caused by an increase of one unit of output. That is the definition of marginal cost.
answer
Marginal cost is the slope of _______.
question
15000.0
explanation: Average cost is the total fixed plus the total variable cost divided by the number produced. Thus, average cost equals $15,000.
explanation: Average cost is the total fixed plus the total variable cost divided by the number produced. Thus, average cost equals $15,000.
answer
Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is ______________.
question
55 units
explanation: The change in output caused by adding the third worker is (190-135) = 55 units.
explanation: The change in output caused by adding the third worker is (190-135) = 55 units.
answer
In the table below, what is the marginal product of the third worker?
question
40,000 candy canes
explanation: 200 candy canes * 200 elves = 40,000 candy canes
explanation: 200 candy canes * 200 elves = 40,000 candy canes
answer
Santa Claus's only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa's total weekly variable cost if he hires 200 elves?
question
Rises, stays the same, increases
explanation: The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more). Fixed cost stays the same no matter what the level of output in the short run.
explanation: The use of a variable input increases as output increases. Therefore, its total cost increases as output increases (you have to buy more). Fixed cost stays the same no matter what the level of output in the short run.
answer
Variable cost ______________ while fixed cost ______________ as output ______________ in the short run.
question
A = 197.50 , B = 150.00 , C = 128.13
explanation: Total cost/ output
explanation: Total cost/ output
answer
Using the table below, calculate the average cost of producing 80, 120, and 160 computers per month
question
X = 45.00, Y= 55.00, Z = 62.50
explanation: Change in variable cost / change in output
explanation: Change in variable cost / change in output
answer
Using the table below, calculate the marginal cost of producing 80, 120, and 160 computers per month
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