Applied Economics Quiz

What is production theory?

• A process of selling goods

• A theory about market competition

• A theory about consumer behavior

• A process of combining inputs to produce output

What are fixed inputs in production analysis?

• Resources that are not needed

• Resources that remain constant in the short-run

• Resources that can be changed in the short-run

• Resources that are always variable

What is the Production Function equation?

• Q = f(i)

• Q = i + f

• Q = i * f

• Q = i / f

What does the Law of Diminishing Marginal Returns predict?

• Adding a factor of production will decrease the cost of production

• Adding a factor of production will have no impact on output

• Adding a factor of production will result in a larger increase in output

• Adding a factor of production will result in a smaller increase in output

What is Marginal Product in production analysis?

• Output produced by fixed inputs

• Additional output produced by an additional unit of input

• Total output produced by all inputs

• Average output produced by all inputs

What is Average Product in production analysis?

• Average contribution per unit of input

• Output per fixed input

• Total contribution per unit of input

• Marginal contribution per unit of input

What is the short-run in production analysis?

• Period where at least one factor of production is considered fixed

• Period where all factors of production are variable

• Period where no production occurs

• Period where only variable inputs are used

Why is production theory important for businesses?

• To maximize output within limited quantities of inputs available

• To minimize output within limited quantities of inputs available

• To ignore the input-output relationship

• To focus only on profits

What determines the behavior of output in the short-run?

• Law of No Marginal Returns

• Law of Constant Marginal Returns

• Law of Increasing Marginal Returns

• Law of Diminishing Marginal Returns

What is the significance of production theory in business?

• Focuses only on production quantity

• Has no impact on profits

• Helps minimize profits for the enterprise

• Helps maximize profits for the enterprise