AGEC Exam 2 Study Guide – Practice Questions, Flashcards & Exam Review
Total physical product curve - correct answer ✔✔Shows the relationship between output and
one input, holding all other inputs in production function constant.
Output=f(labor l capital, and management).
Marginal physical product - correct answer ✔✔MPP for an input is the change in level of output
associated with change in use of a particular input.
MPP = (change in output) / (change in input)
Average physical product - correct answer ✔✔APP is related to the level of output relative to
level of input use.
APP = (output) / (input)
Stage II of production - correct answer ✔✔The point at which input use begins at the end of
Stage I and continues until the value of MPP becomes zero.
Law of diminishing marginal returns - correct answer ✔✔States that as successive units of a
variable input are added to a production process with the other inputs held constant, the MPP
eventually decreases.
Fixed costs - correct answer ✔✔Do not vary with the level of input use.
Variable costs - correct answer ✔✔Do vary with the level of input use.
, Marginal costs - correct answer ✔✔One of the most important concepts; it's the change in the
business's total costs per unit of change in output.
MC = (change in total cost) / (change in output)
Average costs - correct answer ✔✔Involves measuring costs per unit of output, or the level of
cost associated with the level of output.
Avg. Variable Cost = (total variable costs) / (output)
Avg. Fixed Cost = (total fixed costs) / (output)
Avg. Total Cost = (total costs) / (output)
Marginal revenue - correct answer ✔✔Under perfect conditions, MR is the price the producer
receives from the market; aka. total revenue.
MR = (change in total revenue) / (change in output)
Average revenue - correct answer ✔✔Reflects revenue per unit of output that the business
receives for its product.
AR = (total revenue) / (output)
Marginal value product - correct answer ✔✔Represents the additional revenue earned from
employing another unit of input.
MVP = (MPP) x (product price)
Total physical product curve - correct answer ✔✔Shows the relationship between output and
one input, holding all other inputs in production function constant.
Output=f(labor l capital, and management).
Marginal physical product - correct answer ✔✔MPP for an input is the change in level of output
associated with change in use of a particular input.
MPP = (change in output) / (change in input)
Average physical product - correct answer ✔✔APP is related to the level of output relative to
level of input use.
APP = (output) / (input)
Stage II of production - correct answer ✔✔The point at which input use begins at the end of
Stage I and continues until the value of MPP becomes zero.
Law of diminishing marginal returns - correct answer ✔✔States that as successive units of a
variable input are added to a production process with the other inputs held constant, the MPP
eventually decreases.
Fixed costs - correct answer ✔✔Do not vary with the level of input use.
Variable costs - correct answer ✔✔Do vary with the level of input use.
, Marginal costs - correct answer ✔✔One of the most important concepts; it's the change in the
business's total costs per unit of change in output.
MC = (change in total cost) / (change in output)
Average costs - correct answer ✔✔Involves measuring costs per unit of output, or the level of
cost associated with the level of output.
Avg. Variable Cost = (total variable costs) / (output)
Avg. Fixed Cost = (total fixed costs) / (output)
Avg. Total Cost = (total costs) / (output)
Marginal revenue - correct answer ✔✔Under perfect conditions, MR is the price the producer
receives from the market; aka. total revenue.
MR = (change in total revenue) / (change in output)
Average revenue - correct answer ✔✔Reflects revenue per unit of output that the business
receives for its product.
AR = (total revenue) / (output)
Marginal value product - correct answer ✔✔Represents the additional revenue earned from
employing another unit of input.
MVP = (MPP) x (product price)
