Question

TRUE or FALSE

1. Production function is the maximum level of output generated from given levels of inputs.

2. Economic costs of an input include only implicit costs but not explicit costs.

3. With respect to production, the short run is best defined as a time period lasting about six months.

4. In the long run, all factors of production are variable.

5. A firm built an inventory of 16-bit chips for $50,000 last year. However, the introduction of 32-bit chips lowers the market price for 16-bit chips and the inventory can only be sold for $40,000 now. The sunk cost is $50,000.

6. Automobile manufacturers view the assembly-line workers as capital services.

Answer 1

1. TRUE production function is the maximum level of output generated from given levels of inputs.

2. FALSE because economic costs of an input include both implicit costs and explicit costs.

3. FALSE because with respect to production , the short run is best defined as a time period in which atleast one input is fixed.

4. TRUE in the long run , all factors of production are variable.

5. FALSE because The sunk cost is $50,000-40,000= $10,000.