Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

What is the shape of average cost curve? Provide the reason for that particular shape.

A rise in the price of an input can be expected to lead to a rise in its marginal physical product.

Figure 7-13 -AC is lower in the long run than in the short run because

The long-run average cost curve shows the lowest possible average cost for each output level, given that all inputs are variable.

Total physical product is maximized if marginal physical product is zero.

The case of production with a single variable input is analogous to

In a bakery for a given amount of croissant production, an additional pastry worker produces 100 additional croissants, and one extra mixing machine produces 50 extra croissants.Each pastry worker costs $30 to hire, and a mixing machine costs $10 per unit.The bakery owner should

-A total product curve shows the

Figure 7-5 -Which of the curves in Figure 7-5 could be a firm's average fixed cost curve?

Marginal revenue product is the effect of a one-unit increase in an input on the cost of production.

If on a given product indifference curve, a firm is using an insufficient (nonoptimal) amount of one of its inputs,

When economies of scale are present,

Figure 7-17 -A firm that is seeking to minimize costs to produce a certain output

For most firms, if the marginal cost curve is plotted on a graph, marginal cost will

The "law" of diminishing returns rests on the "law" of variable input proportions.

Firms choose the highest production indifference curve they can obtain given the lowest possible budget line.

Firms should use a resource up to a point where MRP = P.

Figure 7-16 -In Figure 7-16, as we move from A to B,

A budget line is the locus of all points representing every input combination of inputs that the producer can afford to buy with a given amount of money and given input prices.