ECON2150 Midterm #1 Exam Prep Questions with
Verified 100% Correct Answers
Constraints - ✔✔The restrictions or limits imposed on a decision maker in a
constrained optimization problem
marginal - ✔✔tells us how a dependent variable changes as a result of adding one
unit of an independent variable
Marginal cost - ✔✔measures the incremental impact of the last unit of the
independent variable (output) on the dependent variable (total cost)
Equilibrium - ✔✔A state or condition that will continue indefinitely as long as factors
exogenous to the system remain unchanged
comparative statics - ✔✔Analysis used to examine how a change in some exogenous
variable will affect the level of some endogenous variable in an economic system
Increasing marginal returns to labour - ✔✔The region along the total product
function where output rises with additional labour at an increasing rate
Diminishing marginal returns to labour - ✔✔The region along the total product
function in which output rises with additional labour but at a decreasing rate
Diminishing total returns to labour - ✔✔The region along the total product function
where output decreases with additional labour
, Average product (AP) - ✔✔The average amount of output per unit of labour
F(l)/l - ✔✔AP =
Marginal product - ✔✔The rate at which total output changes as the quantity of
labour the firm uses is changed
the derivative of the production function = change in F(l)/change in l - ✔✔MP =
law of diminishing returns - ✔✔the principle that, at some point, adding more of a
variable input, such as labor, to the same amount of a fixed input, such as capital, will
cause the marginal product of the variable input to decline
Factors of production - ✔✔Resources that are used to produce a good
Inputs - ✔✔Resources, such as labour, capital equipment, and raw materials, that are
combined to produce finished goods
Output - ✔✔The amount of a good or service produced by a firm
Production function - ✔✔A mathematical representation that shows the maximum
quantity of output a firm can produce given the quantities of inputs that it might employ
efficient - ✔✔points on the production function are?
inefficient - ✔✔points inside the production function are?
Verified 100% Correct Answers
Constraints - ✔✔The restrictions or limits imposed on a decision maker in a
constrained optimization problem
marginal - ✔✔tells us how a dependent variable changes as a result of adding one
unit of an independent variable
Marginal cost - ✔✔measures the incremental impact of the last unit of the
independent variable (output) on the dependent variable (total cost)
Equilibrium - ✔✔A state or condition that will continue indefinitely as long as factors
exogenous to the system remain unchanged
comparative statics - ✔✔Analysis used to examine how a change in some exogenous
variable will affect the level of some endogenous variable in an economic system
Increasing marginal returns to labour - ✔✔The region along the total product
function where output rises with additional labour at an increasing rate
Diminishing marginal returns to labour - ✔✔The region along the total product
function in which output rises with additional labour but at a decreasing rate
Diminishing total returns to labour - ✔✔The region along the total product function
where output decreases with additional labour
, Average product (AP) - ✔✔The average amount of output per unit of labour
F(l)/l - ✔✔AP =
Marginal product - ✔✔The rate at which total output changes as the quantity of
labour the firm uses is changed
the derivative of the production function = change in F(l)/change in l - ✔✔MP =
law of diminishing returns - ✔✔the principle that, at some point, adding more of a
variable input, such as labor, to the same amount of a fixed input, such as capital, will
cause the marginal product of the variable input to decline
Factors of production - ✔✔Resources that are used to produce a good
Inputs - ✔✔Resources, such as labour, capital equipment, and raw materials, that are
combined to produce finished goods
Output - ✔✔The amount of a good or service produced by a firm
Production function - ✔✔A mathematical representation that shows the maximum
quantity of output a firm can produce given the quantities of inputs that it might employ
efficient - ✔✔points on the production function are?
inefficient - ✔✔points inside the production function are?
