Production and costs in the short run

What is the production function?

• A type of economic theory

• The relationship that describes how inputs are transformed into output

• A method to calculate fixed costs

• A formula for calculating average product

What is a variable input?

• An input that cannot be changed in the short run

• An input that can be varied in the short run

• An input that is always fixed

• An input that is not used in production

What does the law of diminishing returns state?

• The increase in output from an increase in the variable input must eventually decline

• Output will always increase with more inputs

• All inputs are variable in the short run

• Fixed costs do not affect production

What is marginal product?

• Total output divided by the quantity of input

• The change in total product due to a 1-unit change in the variable input

• The total cost of production

• The average cost of fixed inputs

What is the definition of total cost?

• The sum of fixed costs only

• The sum of variable costs only

• All costs of production, including fixed and variable costs

• The cost of labor only

What happens when the marginal cost is less than average cost?

• The total cost remains constant

• The average cost curve must be decreasing

• The average cost curve must be increasing

• The marginal cost curve is irrelevant

What is the average product?

• The change in total product due to a change in fixed input

• The total cost divided by the quantity of output

• The maximum output achievable

• Total output divided by the quantity of variable input

In the long run, what is true about all factors of production?

• All factors are fixed

• All factors are variable

• Some factors are fixed and some are variable

• Only labor is variable