CHAPTER 5 - PRODUCTION THEORY

Based on the theory of production, economic efficiency refers to _____________________.

• the combination of inputs that will maximize outputs

• the combination of inputs that involves decreasing costs

• the combination of inputs that involves minimal costs

• the combination of inputs that involves a constant cost

Which of the following statement BEST describes the short run economy?

• It is a period of one year or less

• It is a period of time where firms are free to change all their inputs

• It is a period of time where at least one of the firm's inputs is fixed

• It is a period of time where fixed inputs become variable inputs because of depreciation

Which of the following combination is TRUE about factors of production?

• Capital - Interest

• Labor - Profit

• Land - Output

• Entrepreneur - Dividend

The following table shows production of output at several levels of labor

At 2nd labor level, the average production is ____________ units

• 72

• 73

• 74

• 75

When the marginal product is negative, the total product is ________________

• decreasing

• positive

• negative

• maximum

Which of the following factors of production is likely to be variable in the short run?

• The size of the firm's plant

• The location of the firm

• The number of workers

• The amount of machinery used

The following table shows output quantities at the several of labor.

At the level of 3rd labors, average production is _________ units

• 10.4

• 23.5

• 25.3

• 28.3

Long run refers to time period in which

• all inputs cannot be increased

• all inputs can be increased

• there is at least one variable input

• there is at least one fixed inputs

"When one input of variable input is added to fixed input, it will decrease the production."

This situation can be described as ________________

• law of marginal return

• law of negative marginal return

• law of increasing marginal return

• law of decreasing marginal return

The average product exceeds the marginal product in the production function refers to level starting from __________

• zero up to maximum marginal product

• marginal product until to maximum

• maximum average product and continues

• maximum total product and continues