Microeconomics – Lecture 4. Supply and Production Theory

  1. Illustrate the production function algebraically and explain its components.
  2. What does the production function specify?
  3. Define the short run. Define the long run.
  4. What is the difference between fixed versus variable costs? Provide several examples of each.
  5. Explain the difference between the short and long run.
  6. Define marginal cost.
  7. Explain the law of diminishing returns.
  8. Define marginal product.
  9. Define and illustrate average fixed cost, variable cost and total cost.
  10. The long run average cost curve is the envelope of what? Illustrate this.
  11. Explain the difference between economies of scale, diseconomies of scale and constant returns to scale. Illustrate each with the appropriate cost curve.
  12. Economies of scale may be traced to what factors?
  13. An industry characterized by increasing returns to scale is called what?
  14. Define minimum efficient scale.
  15. Define both the law of supply and the price elasticity of supply.
  16. What is the difference between economic versus accounting profits? Explain why this difference is important.

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