#1
Which of the following is a fixed cost in production?
Rent for factory space
ExplanationFixed costs remain constant regardless of production level.
#2
What is the role of a production function in economic theory?
To describe the relationship between inputs and outputs in production
ExplanationA production function illustrates how inputs such as labor and capital translate into outputs.
#3
What is the significance of the production possibility frontier in economic analysis?
It illustrates the trade-off between two goods in production
ExplanationThe production possibility frontier shows the maximum combination of goods that can be produced given available resources, illustrating the trade-offs between different production options.
#4
In the context of production, what is the role of a cost function?
To describe the relationship between inputs and outputs
ExplanationA cost function shows how costs vary with changes in production output, helping in decision-making and cost analysis.
#5
What is the formula for calculating total cost in production?
Total Cost = Fixed Cost + Variable Cost
ExplanationTotal cost comprises fixed costs that do not vary with production and variable costs which change with production level.
#6
In economics, what does the term 'marginal cost' refer to?
The cost of the last unit produced
ExplanationMarginal cost is the additional cost incurred by producing one more unit.
#7
What is the concept of economies of scale in production?
The decrease in production cost per unit as output increases
ExplanationEconomies of scale occur when production costs decrease as output volume increases, leading to efficiency gains.
#8
How does the average variable cost change with an increase in production?
Increases
ExplanationAs production increases, average variable costs rise due to diminishing marginal returns.
#9
What is the concept of diseconomies of scale in production?
The increase in production cost as output decreases
ExplanationDiseconomies of scale occur when increasing output leads to higher average costs due to inefficiencies.
#10
What is the Law of Diminishing Marginal Returns?
As production increases, marginal cost increases
ExplanationDiminishing marginal returns occur when increasing input leads to smaller increases in output, resulting in higher marginal costs.
#11
What is the difference between explicit costs and implicit costs in production?
Explicit costs involve cash payments, while implicit costs do not
ExplanationExplicit costs involve tangible expenses, while implicit costs are the opportunity costs of resources used.
#12
What is the relationship between total cost and total variable cost in production?
Total cost is always greater than total variable cost
ExplanationTotal cost includes both fixed and variable costs, making it higher than total variable cost.
#13
What is the main objective of cost minimization in production?
To minimize variable costs
ExplanationCost minimization aims to reduce variable costs while maintaining production levels.
#14
What is the role of technology in reducing production costs?
Decreases variable costs
ExplanationTechnological advancements can reduce variable costs by improving efficiency and productivity.