Figure 7-13 -Everything Else Equal, the AC Curve Will Shift Downward If

question 109

Multiple Choice

Figure 7-13
-Everything else equal, the AC curve will shift downward if

• A)input prices rise.
• B)input MPPs rise.
• C)output rises.
• D)output falls.

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Definitions:

Production Function

An equation or model that describes the relationship between inputs used in production and the output produced.

Diminishing Returns

The principle stating that if one factor of production is increased while others remain constant, the overall returns will incrementally decrease after a certain point, leading to reduced efficiency.

Decreasing Returns to Scale

A situation in which a proportional increase in all inputs results in a less-than-proportional increase in output.

Cobb-Douglas Production Function

The Cobb-Douglas Production Function is an economic model representing the relationship of an output to inputs, typically showing how labor and capital contribute to the production process in a way that reflects diminishing returns.