#1
What is the definition of production in economics?
The process of creating goods and services
ExplanationCreation of goods and services.
#2
What is the difference between fixed costs and variable costs?
Fixed costs remain constant regardless of the level of production, while variable costs change
ExplanationFixed costs constant, variable costs change with production.
#3
What is the definition of total cost?
The sum of fixed and variable costs
ExplanationTotal cost is the sum of fixed and variable costs.
#4
What is the law of diminishing marginal returns?
As the quantity of a variable input increases, the marginal product of that input eventually decreases
ExplanationDecrease in marginal product with an increase in variable input.
#5
What is the difference between explicit costs and implicit costs?
Explicit costs involve monetary payments for resources, while implicit costs do not involve monetary payments
ExplanationDistinction between explicit and implicit costs.
#6
What is the Law of Diminishing Returns in production?
As more of a variable input is added to a fixed input, marginal product eventually decreases
ExplanationMarginal product decline with increased variable input.
#7
What is the formula for calculating average fixed cost?
AFC = Total Fixed Cost / Quantity of Output
ExplanationAverage fixed cost calculation.
#8
What is the relationship between marginal product and total product?
When marginal product is increasing, total product is increasing at an increasing rate
ExplanationIncreasing marginal product leads to increasing total product.
#9
What is the shape of the average variable cost curve in the short run?
U-shaped
ExplanationU-shaped curve in the short run for average variable cost.
#10
In the long run, what is the shape of the average total cost curve when experiencing constant returns to scale?
Horizontal
ExplanationConstant returns to scale lead to a horizontal average total cost curve.
#11
What does the term 'marginal cost' represent?
The change in total cost resulting from producing one more unit of output
ExplanationMarginal cost is the change in total cost with one additional unit of output.
#12
What does the 'U-shaped' average total cost curve indicate?
Economies of scale followed by diseconomies of scale
ExplanationCost structure indicating scale economies and diseconomies.
#13
What is the relationship between marginal cost and average variable cost?
When MC > AVC, AVC is increasing
ExplanationAVC increases when MC is greater than AVC.
#14
What is the difference between economies of scale and diseconomies of scale?
Economies of scale occur when long-run average total cost decreases as output increases, whereas diseconomies of scale occur when long-run average total cost increases as output increases
ExplanationEconomies and diseconomies of scale definition.
#15
What is the relationship between average total cost and marginal cost at the minimum average total cost?
Marginal cost equals average total cost
ExplanationMarginal cost equals average total cost at the minimum.
#16
Which cost curve must always be U-shaped?
Marginal cost curve
ExplanationU-shaped curve for the marginal cost.
#17
What is the relationship between average total cost and marginal cost when average total cost is increasing?
Marginal cost is greater than average total cost
ExplanationMarginal cost surpasses average total cost during an increase.