What is the Law of Diminishing Marginal Returns?

Colin lives in Lineville [pronounced: LAHN-vl], Alabama, and likes to grow zucchini. He applies fertilizer to his crop twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?
A) the law of diminishing marginal utility
B) the law of diminishing marginal returns
C) return equalization principle
D) the principal-agent problem

Define long run costs. How is any given point on a long run average cost curve related to a short run cost curve?

Students often confuse (a) diminishing returns related to variable factors of production and (b) diseconomies of scale. Explain the difference between the two, and give one example of each.

What happens to total product when marginal product is negative?

Define: economies and diseconomies of scale. How are they depicted on the long run average cost curve? What industries have been characterized by economies of scale over the course of your lifetimes?

What three factors cause long-run cost curves to shift?

What assumptions are necessary for the perfect competition model? How realistic are they?

Why are firms operating in perfectly competitive markets considered price takers? Why do competitive firms produce at an output level at which marginal revenue equals marginal cost.

How does the competitive firm decide on the profit-maximizing level of output?

Define the short run and the long run. What types of industries are likely characterized by longer short runs? Why?

Explain, verbally and graphically, total fixed costs, average fixed costs, total variable costs, and average variable costs.

Graphically, verbally, and mathematically (with equations) explain the relationships between TC, TVC, TFC, ATC, AVC and AFC.

Suppose a firm produces bicycles. Will the firm's accounting statement reflect the opportunity cost of bicycles? Why or why not?

Explain the factors that cause a firm's short-run average variable costs to decline initially, but to eventually increase as output rises.

What happens to average product when marginal product is greater than average product?

At what point does marginal product start to decrease?

When costs that do not change with the level of output are
divided by the output level, you have calculated
A) total cost.
B) average total cost.
C) average fixed cost.
D) marginal cost.

Marginal cost is defined as
A) total cost divided by quantity.
B) the change in total cost resulting from the production of one
additional unit of output.
C) total variable cost divided by the number of units produced.
D) average fixed cost times the number of units produced.

In the short run, if average variable costs equal $20, average
total costs equal $70, and output equals 100, then the total
fixed cost equals
A) $50.
B) $1,000.
C) $5,000.
D) $9,000.