1) What is theory of production? ...

an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its outputs or products) it will produce, and how much of each kind of labour, raw material, fixed capital good, etc., that it employs (its inputs or factors of production) it will use (http://www.britannica.com/EBchecked/topic/477991/theory-ofproduction) 2) Define the following a) Production b) Production function It is ...the relationship between the quantity of inputs used to make a good and the quantity of output of that good (Mankiw & Taylor, 2006, p.367). c) Output It is the ...total amount of a good that is produced (Kirk, 2009). d) Labor ...the physical and mental effort used to produce goods and services (McEachern, 2012, p.2) e) Capital ...the buildings, equipment, and human skills used to produce goods and services (McEachern, 2012, p.2). f) Total Product ...a firms total output (McEachern, 2012, p.151) g) Average Product h) Marginal Product ...the increase in output that arises from an additional unit of input (Mankiw & Taylor, 2006, p.252). 3) Discuss the concept of Law of Diminishing Marginal Returns This law states that as more of a variable resource is combined with a given amount of another resource, marginal product eventually declines. The law of diminishing marginal returns is the most important feature of production in the short run. As more and more labor is hired, marginal product could even turn negative, so total product would decline. For example, when Smoother Mover hires an eighth worker, workers start getting in each others way, and they take up valuable space in the moving van. As a result, an eighth worker actually subtracts from output, yielding a negative marginal product. (McEachern, 2012, p. 151). Congestion and confusion happens in the work area, thus cutting down on the total product. 4) What is an isoquant? Provide the properties of isoquant. An isoquant is ... a curve that illustrates the possible combinations of resources that
produce a particular rate of output (McEachern, 2012, p. 171).

5) What is Marginal Rate of Technical Substitution? What is the mathematical expression for MRTS? 6) What is an isocost? What is the slope of an isocost? An isocost is the ...locus of points showing different combinations of variable inputs, labor and capital, that will result in the same total cost for the firm given the prices of inputs and the total cost of the firm. (Tullao, 2009, p.93). Its slope is equal to the ratio of factor prices, which is (Tullao, 2009, p. 93) 7) What is the condition for optimal production/production equilibrium? 8) What is the goal of a firm? The goal of a firm is ...to produce goods and services (Tullao, 2009, p. 183). 9) What is profit? reward for entrepreneurial ability or sales revenue minus resource cost (McEachern, 2012, p.3) 10) How does economic profit differ from accounting profit? 11) What is revenue? What is the mathematical equation of revenue? 12) What is cost? What is the mathematical equation of cost? 13) How does implicit cost differ from explicit cost? 14) Define the following and provide the mathematical representation: a) Total Cost b) Fixed Cost It is defined as any production cost that is independent of the firms rate of output (McEachern, 2012, p152) It is represented by FC c) Variable Cost any production cost that changes as the rate of output changes It is represented by VC d) Marginal Cost It is ...the change in total cost resulting from a one-unit change in output. (McEachern, 2012, p. 154) It is represented by MC e) Average Fixed Cost ...the total fixed cost divided by the amount of production (Tullao, 2009, p. 88) AFC f) Average Variable Cost It is the variable cost divided by output It is represented by AVC g) Short-Run Cost h) Long-Run Cost

15) In one graph kindly plot the following Average Fixed Cost, Average Variable cost, Average Total Cost, and Marginal Cost

SOURCES Kirk, R. (2009). Economics: Work and Prosperity in Christian Perspective. United States: Pensacola Christian College Mankiw, G. & Taylor, M. (2006). Economics. United Kingdom: Thomson Learning McEachern, W. (2012). Economics: A Contemporary Introduction. 9th edition. United States: Cengage Learning http://www.ehow.com/info_8496432_properties-isoquants.html

Drake, P. & Fabozzi, F. (2012). Analysis of Financial

Statements. U.S.A.: John Wiley & Sons, Inc.

NCS Pearson. (2013). Revenue formula. Retrieved July 27, 2013 from: http://formulas.tutorvista.com/math/revenue-formula.html