True or False

1. Economic Efficiency is the technically efficient method with the highest production cost to the business firm.

2. The Law of Diminishing Returns stipulates that for every additional input (variable) to a fixed input, output increases in a diminishing rate.

3. In the irrational production stage, MP is already negative, TP and AP decreased.

4. Isocosts are non-intersecting and non-tangent. Isocosts have the same properties as consumers' indifference curves.

5. Long-run cost, LAC is the cost of adjusting all factors of production, including plant capacity.

Multiple Choice.

1. In the function, Q = f(L), any changes in the input L would result to a change in the output Q. Labor (L) here is a (variable, fixed, constant)input.

2. The saturation point in production curve shows the TP that is (increasing, constant, decreasing).

3. The symbolic equation of total cost is, TC = TFC + TVC. In graphs the curve that is represented by a straight horizontal line is ( TC, TFC, TVC).

4. Diseconomies of scale means the (increase, decrease, constant) in output of the firm is

5. (less than, greater than) proportionate to the increase in input of the firm.

Essay:

1. What is more important to a firm: technical efficiency or economic efficiency? Support or justify your answer.

2. The marginal product and the average product are more derivative concepts of the total product, yet they appear to be playing a vital role in microeconomic analysis. Give the importance of the MP and the AP showing mathematical derivation.

3. In the Factor-Factor Relationship, state the governing principle in determining the optimum combination of two variable inputs. Sketch a graphical illustration with complete labels.

4. Some scholars recommend that all students, regardless of course major must study price theory. Justify your answers.

5. Someone tells you "That theory has no practical value because it is abstract, it is not real, it exists only in the mind of the theorist."

Refute the statement.