Exam 5: The Production Process and Costs

A production function exhibits decreasing returns to scale if a twofold (threefold, etc.) increase in all inputs increases output by less than twofold (less than threefold, etc.).For example, by doubling the use of capital and labor, the firm would less than double its output. a.What would the average and marginal cost curves look like under decreasing returns to scale? Explain. b.Give an example of a production function that exhibits decreasing returns to scale.

The difference between average total costs and average variable costs is

The inputs that a manager uses to alter production are referred to as:

The manager institutes an incentive structure to ensure

For the cost function C(Q) = 200 + 3Q + 8Q² + 4Q³, what is the average fixed cost of producing six units of output?

The management of Morris Industries is considering a plan to terminate a new employee.The action stemmed from documented evidence supplied by the firm's accounting department that this new employee did not add as much to the firm's overall output as did a worker hired two weeks earlier.Based on this evidence, do you agree that the latest worker hired should be fired? Explain.

Variable factors of production are the inputs that a manager

An isoquant defines the combination of inputs that yield the producer

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:

Suppose the long-run average cost curve is U-shaped.When LRAC is in the increasing stage, there exist

For the cost function C(Q) = 500 + 12Q + 4Q² + Q³, what is the marginal cost of producing the eighth unit of output?

The Leontief production function

Suppose the production function is given by Q = 2K + 5L.What is the marginal product of labor when 15 units of capital and 10 units of labor are employed?

The marginal rate of technical substitution

Which of the following sets of economic data is minimizing the cost of producing a given level of output?

Suppose the production function is given by Q = 2K + L.If w = $4 and r = $4, how many units of K and L will be utilized in the production process?

What is the average product of labor, given that the level of labor equals 10, total output equals 1200 and the marginal product of labor equals 200?

If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use

The production function is Q = K^.6 L^.4.The marginal rate of technical substitution is:

Which of the following is not a measure of productivity?