Production Function, Costs, Revenue, Profit

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

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

You own a restaurant and every month you must pay your water bill. However, you never know how much that bill will be because the amount changes based upon how much water your business uses. This is a...

• fixed cost

• variable cost

If you own a home, you must pay for electricity you use. The amount you pay changes every month depending on how much you use. This is an example of a...

• fixed cost

• variable cost

The best definition for fixed costs is

• Costs that do not depend on the level of production

• Costs that do not change

• Costs that increase when you produce more

Marginal product measures the change in:

• total cost brought about by changing production by one unit.
• product price brought about by changing production by one unit.
• a firm’s revenue brought about by changing production by one unit.
• the firm’s additional output brought about by employing one additional unit of input.

The _____ is the situation in which the marginal product of labour is greater than zero and declining as more labour is hired.

• law of demand
• law of diminishing supply
• law of diminishing returns
• law of returns to scale

Total fixed costs:

• vary as output varies.
• are zero when the output is zero.
• are the costs that do not vary with the output.
• are the costs that increase with output.

The marginal production from 3 to 4 labors is _________.

• 2

• 7

• 4

• 8

The output maximum is at labor of _______________

• 3 labors

• 4 labors

• 5 labors

• 6 labors