Question

Plz explain the definintion of those

The final exam will cover the material from the last third of the course. You are responsible for definitions, explanations, proofs, arguments, figures and descriptions. The list of topics includes: • productivity • returns to scale • cost minimization • conditional factor demands • cost function (long- and short-run) • profit maximization • supply function and curve • (unconditional) factor demands • profit function • Marshallian (partial) equilibrium, long- and short-run • consumer and producer surplus • monopoly supply and pricing • Cournot equilibrium

Answer 1

Answer

Productivity :

Definition : defined as the efficient use of resources, labour, capital, land, materials, energy, information, in the production of various goods and services. Higher productivity means accomplishing more with the same amount of resources or achieving higher output in terms of volume and quality from the same input.

Figure : is usually expressed as output/ Input = productivity.

Measured productivity is the ratio of a measure of total outputs to a measure of inputs used in the production of goods and services.

Explanation & Description : Productivity improvement results in direct increases in the standard of living under conditions of distribution of productivity gains according to contribution.
Argument : We argue that, on productivity grounds, it makes sense to invest in young children from disadvantaged environments. Substantial evidence shows that these children are more likely to commit crime, have out-of-wedlock births, and drop out of school.

Returns to scale

Definition :returns to scale and economies of scale are related but different concepts that describe what happens as the scale of production increases in the long run, when all input levels including physical capital usage are variable.

Explanation & description : The concept of returns to scale arises in the context of a firm's production function. It explains behavior of the rate of increase in output (production) relative to the associated increase in the inputs (the factors of production) in the long run.

Proof & figure : Increasing Returns to Scale: When our inputs are increased by m, our output increases by more than m. Constant Returns to Scale: When our inputs are increased by m, our output increases by exactly m. Decreasing Returns to Scale: When our inputs are increased by m, our output increases by less than m.

Argument : If r = 1, then l r = l , so increasing inputs by factor l will increase output by the same factor l . This, of course, is the very definition of constant returns to scale. If r > 1, then l r > l , which implies that when we increase inputs by scalar l , output will increase by more than proportionally.

Cost Minimisation :

Definition : Cost minimisation is a financial strategy that aims to achieve the most cost-effective way of delivering goods and services to the require level of quality.

Explanation & Description : Cost minimisation is a financial strategy that aims to achieve the most cost-effective way of delivering goods and services to the require level of quality. ... In theory a reduction in costs results in higher profits and better cash flow. But not always!

Proof and figure : Cost is minimized at the levels of capital and labor such that the marginal product of labor divided by the wage (w) is equal to the marginal product of capital divided by the rental price of capital (r).

Argument : Cost minimization is a basic rule used by producers to determine what mix of labor and capital produces output at the lowest cost. In other words, what the most cost-effective method of delivering goods and services would be while maintaining a desired level of quality.

Conditional factor demands :

Definition : conditional factor demand is the cost-minimizing level of an input (factor of production) such as labor or capital, required to produce a given level of output, for given unit input costs (wage rate and cost of capital) of the input factors.

Explanation & Description :  In economics, a conditional factor demand is the cost-minimizing level of an input (factor of production) such as labor or capital, required to produce a given level of output, for given unit input costs (wage rate and cost of capital) of the input factor.

Cost function :

Definition: A cost function is a function of input prices and output quantity whose value is the cost of making that output given those input prices, often applied through the use of the cost curve by companies to minimize cost and maximize production efficiency.

Long run and short run cost functions. In the long run, the firm can vary all its inputs. In the short run, some of these inputs are fixed.

Figure : The cost function equation is C(x)= FC(x) + V(x). In this equation, C is total production cost, FC stands for fixed costs and V covers variable costs. So, fixed costs plus variable costs give you your total production cost.

long-run total cost divided by the quantity of output produced. Long-run average cost is guided by returns to scale.

short-run marginal cost is: MC= d(TC)/d(Q) where TC is total cost, Q is quantity, and d signifies the change in these values.

Profit Maximization :

Definition : profit maximization is the short run or long run process by which a firm may determine the price, input, and output levels that lead to the highest profit.

Explanation & Description : Profit maximisation is assumed to be the dominant goal of a typical firm. This means selling a quantity of a good or service, or fixing a price, where total revenue (TR) is at its greatest above total cost (TC).

Arguments for Profit Maximization

(i) Main aim is earning profit. (ii) Profit is the parameter of the business operation. (iii) Profit reduces risk of the business concern. (iv) Profit is the main source of finance.

Supply function and curve :

Definition : The supply function is the mathematical expression of the relationship between supply and those factors that affect the willingness and ability of a supplier to offer goods for sale. An example would be the curve implied by where is the price of the good and is the price of a related good.

Proof & figure : The higher the price of a good, the more a firm is willing to produce and offer, hence, the supply function is upward sloping.

Factor Demand (Unconditional) :

Definition : Unconditional factor demands means to solve profit maximization problem. At first set up profit function as a function of output and input prices, fixed level. of capital, and the amount of labor: π = p10L.

Proof & figure : The profit function is equal to the maximal value of profit for given values of the inputs. It is defined by: Differentiating the profit function with respect to W, Thus, unconditional demand for a factor is a decreasing function of the cost of this factor.

Marshall Ian Equilibrium :

Definition, Explanation & Description : Partial equilibrium is a condition of economic equilibrium which takes into consideration only a part of the market, ceteris paribus, to attain equilibrium. ... This makes analysis much simpler than in a general equilibrium model which includes an entire economy.

Consumer and producer surplus :

Definition : The consumer surplus is the difference between the highest price a consumer is willing to pay and the actual market price of the good. The producer surplus is the difference between the market price and the lowest price a producer would be willing to accept. ... The two together create an economic surplus.

Figure & proof : a) Consumer surplus is equal to the maximum amount a consumer is willing to pay for a good, minus what the consumer has to pay for the good. b) Producer surplus is equal to the amount received from selling a good, minus the minimum amount the seller needed to receive, in order to be willing to sell the good.

Monopoly supply and price :

Definition: A monopoly occurs when a firm lacks any viable competition, and is the sole producer of the industry's product. ... (b) Lower the price paid by those who were willing to buy the product at the higher price, thereby ensuring a lower sales revenue on the product sales to those who were willing to pay the higher price.

Cournot Equilibrium

Definition: The Cournot model of oligopoly assumes that rival firms produce a homogenous product, and each attempts to maximize profits by choosing how much to produce. All firms choose output (quantity) simultaneously. ... The resulting equilibrium is a Nash equilibrium in quantities, called a Cournot (Nash) equilibrium

Proof : Cournot's model: firm changes its behavior if it can increase its profit by changing its output, on the assumption that the output of the other firm will not change but the price will adjust to clear the market.

Figure: is a model of imperfect competition in which two firms with identical cost functions compete with homogeneous products in a static setting. ... There are two firms operating in a limited market. Market production is: P(Q)=a-bQ, where Q=q1+q2 for two firms.