Give a short concise definition for the following terms and explain their relationship to the study of economics
a. marginal physical product
b. marginal revenue product
c. law of diminishing returnsd economies of scale
a. Marginal physical product is the increase in total output resulting from a one-unit increase in the use of an input, holding other input amounts constant. MPP gives a measure of the productivity of a particular input, which may be used in deciding on the optimal use of the input.
b. Marginal revenue product is the additional money revenue that a firm receives when it increases the quantity of some input by one unit and is calculated as MPP times the price per unit of output. The firm determines optimal input where MRP is equal to the price of the input.
c. The "law" of diminishing returns holds that as additional units of a variable input are added to a fixed mix of all other inputs, marginal physical product will eventually decline. The diminishing returns play a crucial role in MRP, since the decline in MPP reduces MRP and leads to a definite point beyond which the firm will not expand.
d. Economies of scale are experienced by a firm if a doubling of inputs more than doubles output. This tells the firm that long-run average costs are declining.
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Cyclical unemployment is
A) the total of structural and frictional unemployment. B) created by a recession. C) part of frictional unemployment. D) higher when the economy is expanding. E) always greater than the total of structural and frictional unemployment.
What is the rationale behind a cap-and-trade emission allowance system?
A) It creates a market for externalities. B) It disciplines polluting firms by specifying the maximum amount of emissions allowed and gives them permits to pollute up to their allowance. C) It provides firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance. D) It raises revenue for the government through the sale of permits.
The table above shows the total product schedule for Rick's Lawn Service, a yard care company. The average product of labor ________ when the 7th worker is hired
A) reaches its maximum B) equals 1 lawn mowed C) equals 28 lawns mowed D) equals 4 lawns mowed E) equals 2 lawns mowed
When an economy becomes attractive to global investors, sparking a capital inflow, one result is often a decrease in net exports. Why?
What will be an ideal response?