Rational Production Decisions Require an Understanding of

question 24

Multiple Choice

Rational production decisions require an understanding of

• A)trade-offs.
• B)opportunity costs.
• C)scarcity of resources.
• D)All of the above are correct.

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Definitions:

Average-Variable-Cost Curve

The average-variable-cost curve graphs the unit variable cost against the level of output, typically showing a U-shaped curve due to economies and diseconomies of scale.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces.

Marginal Product

The additional output that is generated by employing one more unit of a specific factor of production while holding other factors constant.

Labor

Employing human mental and physical work in generating services and manufacturing goods.