4.1.4.3 The law of diminishing returns and returns to scale NOTE

What defines the short run in terms of production factors?

• No factors of production are variable

• All factors of production are fixed

• All factors of production are variable

• At least one factor of production is fixed

What can firms adjust in the long run?

• Both variable and fixed inputs

• Only fixed inputs

• Neither variable nor fixed inputs

• Only variable inputs

What does marginal returns represent?

• Average output per unit of variable input

• Change in total output divided by the change in variable input

• Total output divided by total inputs

• Total output from all units of variable input

What indicates the average returns?

• Total output from all units of variable input

• Change in total output per unit of variable input

• Total output divided by the quantity of variable input

• Change in total output divided by total inputs

What does the law of diminishing returns state?

• Marginal product increases with additional units of input

• Marginal product remains constant with additional units of input

• Marginal product decreases with additional units of input

• Total product decreases with additional units of input

What occurs under increasing returns to scale?

• Output increases less than proportionally to inputs

• Output increases more than proportionally to inputs

• Output remains constant regardless of input changes

• Output increases proportionally to inputs

What is a characteristic of constant returns to scale?

• Doubling all inputs doubles the output

• Doubling all inputs less than doubles the output

• Doubling all inputs has no effect on output

• Doubling all inputs more than doubles the output

What typically happens under decreasing returns to scale?

• Output increases less than proportionally when inputs are increased

• Output more than doubles when inputs are doubled

• Output doubles when inputs are doubled

• Output remains unchanged regardless of input changes

How does the concept of economies of scale relate to production costs?

• Production costs increase as the scale of production increases

• Production costs decrease as the scale of production increases

• Production costs are not affected by the scale of production

• Production costs initially decrease, then increase as the scale of production increases

What effect does the law of diminishing marginal utility have on consumer choice?

• Consumers tend to buy more of a product as they consume more of it

• Consumers tend to buy less of a product as they consume more of it

• Consumers' choices are unaffected by the quantity consumed

• Consumers' preferences for products increase with consumption