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    Chapter 6 Production and Costs 6.1 Variable Factors and Fixed Factors

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    Vicky Chen

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    Chapter 6 Production and Costs 6.1 Variable Factors and Fixed Factors

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    Vicky Chen
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    CH06(23-24)

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    22 views3 pages

    Chapter 6 Production and Costs 6.1 Variable Factors and Fixed Factors

    Uploaded by

    Vicky Chen

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 3

    Chapter 6 Production and Costs

    6.1 Variable Factors and Fixed Factors


    1. According to ________________________________, factors of production can
    be divided into variable factors and fixed factors.
    2. Variable factors are factors of production that _____________________________
    ________________________, while fixed factors are factors of production that
    _________________________________________________________________.
    3. Read the news extract carefully.
    A famous pop star is going to give a concert in the Hong Kong coliseum for
    3 days. Tickets sold out quickly, and the organiser decides to add additional
    seats. The organiser also recruits more helpers.
    Among the factors of production mentioned, which of them is/are variable
    factor(s)? Which of them is/are fixed factor(s)?
    _________________________________________________________________
    _________________________________________________________________

    6.2 The Short Run and the Long Run


    4. According to ______________________________________________________,
    production can be classified into the short run and the long run.
    5. The short run refers to a period in which _________________________________
    _________________, while the long run refers to a period in which ___________
    __________________________________.
    6. The following table shows the production schedule of a firm.
    Machines (units) Labour (units) Output (units)
    1 5 20
    2 5 24
    3 5 28
    4 5 32
    Machine is a (fixed/variable) factor. Labour is a (fixed/variable) factor. The firm is
    operating in the (short run/long run).

    6.3 Input-output Relationship in the Short Run


    7. ______________________ is the change in total product resulting from
    employing an additional unit of a variable factor in a period of time.
    ______________________ is the total quantity of output produced by a firm in a
    period of time.
    ______________________ is the average quantity of output produced by one unit

    1
    of a variable factor in a period of time.
    8. The law of diminishing marginal returns states that in the short run, as more and
    more units of _____________________ are added to a given quantity of
    _____________________, _____________________ will decrease eventually,
    other things being constant.
    9. (a) Complete the following table.
    Raw materials Total product Average Marginal
    Labour (units)
    (units) (units) product (units) product (units)
    10 1 500 500
    10 2 1500 1000
    10 3 1000 1500
    10 4 1250 2000
    10 5 6500 1300
    10 6 7500 1250
    (b) Diminishing marginal returns sets in when the _____ unit of raw materials is
    put to work.

    6.4 Cost of production


    10. Variable costs are the costs that (change/do not change) as output changes. Fixed
    costs are the costs that (change/do not change) as output changes.
    11. Complete the following table.
    Average
    Output Total cost Average Marginal
    variable
    (units) ($) cost ($) cost ($)
    cost ($)
    0 50 - - -
    1 80 80
    2 100 20
    3 150 33.3
    4 220 42.5
    5 320 100
    6 480 80

    6.5 Economies and Diseconomies of Scale


    12. When a firm increases its output by increasing the employment of all
    _________________________________, its scale of production increases. This
    happens in (the short run/the long run/both the short run and the long run).

    2
    13. Which of the following are the possible reasons leading to internal economies of
    scale? Put a tick () in the appropriate box(es).
    □ Lower sourcing costs
    □ Lower costs of buying raw materials
    □ Lower marketing expenses
    □ Higher degree of specialisation

    14. Suggest TWO possible reasons leading to external diseconomies of scale.


    __________________________________________________________________
    __________________________________________________________________

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