C5 : SET 2 - PRODUCTION THEORY

An increase in total production due to an increase of one unit of variable input is known as ______________________.

• Marginal cost

• Average cost

• Marginal production

• Average production

A firm’s planning curve refers to its _____________________.

• Short run marginal cost curve.

• Long run marginal cost curve.

• Short run marginal cost curve.

• Long run marginal cost curve.

Which are not factors of production?

• Land.

• Labour.

• Money.

• Entrepreneur.

When the output increases in higher proportion than increase in inputs, the returns to scale is __________________.

• constant

• increasing

• decreasing

• negative

When the total product is maximum, the marginal product is _________________.

• positive.

• zero.

• negative.

• maximum.

Marginal product curve and the average product curve intersect _______________.

• at the maximum point of the marginal product curve.

• where total product is at a maximum.

• where marginal product equals zero.

• at the maximum point of the average product curve.

It is impossible for total production to be ______________ when marginal product is ___________.

• decreasing; positive

• increasing; decreasing

• increasing; increasing

• positive; negative

In the short run, there are only fixed costs.

• TRUE

• FALSE

In the long run, all inputs are considered to be variable inputs.

• TRUE

• FALSE

In the short run, variable costs are higher than fixed cost.

• TRUE

• FALSE