#1
In microeconomics, what does the term 'factor market' refer to?
Market for factors of production
ExplanationMarket where factors of production such as labor and capital are bought and sold.
#2
Which of the following is NOT considered a factor of production?
Money
ExplanationMoney is not directly used to produce goods or services.
#3
What does the law of diminishing marginal returns state?
As more of a variable input is added to a fixed input, the marginal product of the variable input will eventually decrease.
ExplanationAdding more of a variable input to a fixed input will lead to diminishing returns.
#4
What is the difference between total cost and variable cost?
Total cost includes all costs while variable cost includes only variable costs.
ExplanationTotal cost comprises all costs, whereas variable cost pertains only to costs that vary with output.
#5
What is the difference between average product and marginal product?
Average product measures total output while marginal product measures additional output from one more unit of input.
ExplanationAverage product indicates total output per unit of input, whereas marginal product measures the change in output with each additional unit of input.
#6
What does the term 'marginal cost' represent in production theory?
The additional cost of producing one more unit of output.
ExplanationThe cost incurred to produce an additional unit of output.
#7
What is an isoquant curve?
A curve representing various combinations of two inputs that yield the same level of output.
ExplanationGraphical representation showing combinations of inputs producing identical levels of output.
#8
What is the relationship between marginal cost and marginal product?
They are inversely related.
ExplanationAs marginal product decreases, marginal cost tends to increase.
#9
What is the long-run average cost curve in the long-run production process?
A curve that shows the relationship between the long-run average cost and the quantity of output produced when all inputs are variable.
ExplanationGraph showing the average cost of production over different output levels when all inputs can be varied.
#10
What is meant by economies of scale?
The cost advantages that a business can exploit by expanding its scale of production.
ExplanationReduction in average cost of production as output increases.