The Total Product Curve

question 137

Multiple Choice

The total product curve:

• A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input.
• B) will become flatter as output increases if there are diminishing returns to the variable input.
• C) will be downward-sloping if there are diminishing returns to the variable input.
• D) will become horizontal when the marginal product of the variable input is constant.

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Definitions:

Shut Down

A short-term decision by a firm to cease operations and production when the market price is below its variable costs, to minimize losses.

Economic Loss

A situation where total costs exceed total revenues, leading to a negative economic profit.

AVC

Average Variable Cost, an economic metric reflecting the variable costs (such as labor and materials) per unit of output.

ATC

Average Total Cost, which is the sum of all production costs divided by the quantity of output produced, a critical factor in economic analysis of a company's efficiency.