chapter 5

What is the definition of production?

• The process of transforming inputs into outputs

• The process of storing goods and services

• The process of selling goods and services

• The process of consuming goods and services

Which of the following is not a factor of production?

• Capital

• Land

• Machinery

• Labour

What does the term 'outputs' refer to in the production process?

• The finished products

• The natural resources

• The factors of production used

• The process of transforming inputs

What is the formula for the short-run production function?

• Q = (K, L)

• Q = (K, M)

• Q = (L, M)

• Q = (K, L, M)

What is the law of diminishing marginal returns?

• The rate of increase in output will increase

• The rate of increase in output will decrease

• The rate of increase in output will fluctuate

• The rate of increase in output will remain constant

What does the average product (AP) measure in the production process?

• The total product by the amount of input used

• The amount of output produced when a given amount of input is used

• The change in total product corresponding to an additional unit change in input

• The maximum output that can be produced with given inputs

What is the relationship between total product (TP) and marginal product (MP)?

• When MP is negative, TP declines

• When MP is zero, TP is at its minimum

• When MP is decreasing, TP increases at an increasing rate

• When MP is increasing, TP increases at a decreasing rate

What does the isoquant represent in the long-run production function?

• All the possible combinations of inputs that give different levels of output

• All the possible combinations of variable inputs that give different levels of output

• All the possible combinations of two factor inputs that give the same level of output

• All the possible combinations of fixed inputs that give the same level of output

What is the Marginal Rate of Technical Substitution (MRTS) used to estimate?

• The amount of input to be replaced by output without increasing or decreasing output

• The amount of output to be replaced by input without increasing or decreasing output

• The amount of output to be replaced by another output without increasing or decreasing output

• The amount of input to be replaced by another input without increasing or decreasing output

What does increasing returns to scale indicate?

• Output decreases when all factors of production are increased

• Output increases by a smaller proportion when all factors of production are increased

• Output increases by a greater proportion when all factors of production are increased

• Output increases by the same proportion when all factors of production are increased