#1
Which of the following is a characteristic of a production function?
It shows the relationship between inputs and outputs
ExplanationProduction function demonstrates input-output association.
#2
Which of the following best defines economic cost?
The total opportunity cost of production
ExplanationCost includes all forgone opportunities.
#3
What does the law of diminishing returns state?
As more units of a variable input are added to fixed inputs, each additional unit of the variable input will yield progressively smaller increases in output
ExplanationAdding more of a variable input eventually leads to diminishing returns.
#4
In the long run, all costs are:
Variable costs
ExplanationIn the long run, all inputs are variable.
#5
What is the formula to calculate average variable cost (AVC)?
AVC = Total Variable Cost / Quantity of Output
ExplanationAverage variable cost per unit of output.
#6
Which of the following is true about the average fixed cost (AFC) curve?
It decreases continuously as output increases
ExplanationFixed costs spread over increasing output.
#7
What does the Isoquant curve represent?
Various combinations of inputs that yield the same level of output
ExplanationDifferent input mixes achieving identical output levels.
#8
What is the slope of the total product curve when it is increasing at an increasing rate?
Positive
ExplanationOutput is increasing at an accelerating pace.
#9
What is the relationship between marginal cost (MC) and average total cost (ATC) when ATC is at its minimum?
MC = ATC
ExplanationMarginal cost equals average total cost at its minimum.
#10
In the short run, if marginal cost (MC) is greater than average total cost (ATC), what happens to ATC?
ATC increases
ExplanationMarginal cost exceeding average total cost leads to an increase in the latter.
#11
What is the relationship between marginal cost (MC) and average variable cost (AVC) at the minimum point of AVC?
MC = AVC
ExplanationMarginal cost equals average variable cost at the latter's minimum.
#12
What is the shape of the long-run average total cost (LRATC) curve under constant returns to scale?
U-shaped
ExplanationCost initially decreases then rises with output expansion.
#13
What is the mathematical representation of a production function?
Y = f(K, L)
ExplanationOutput is a function of capital and labor inputs.