Chapter 7

  1. What are the factors of production?
    • Land
    • Labor
    • Capital
    • Entrepreneurship
  2. It is the transformation of inputs to outputs
  3. These are the factors of production
  4. It is the result that has been created by the inputs
  5. 2 types of output
    • Goods
    • Services
  6. It is the process by which inputs are turned into outputs
    Technology of a firm
  7. Classification of the factors of production
    • Fixed Factor
    • Variable Factor
  8. Remains constant regardless the volume of production
    Fixed factor
  9. Changes in accordance with the volume of production
    Variable factor
  10. Two aspects of production Decision
    • The ability to produce
    • The willingness to produce
  11. prescribed by the resources availability and state of technology
    The ability to produce
  12. Prescribed by profit incentives
    The willingness to produce
  13. It is the relationship between quantities of various inputs used an the maximum output that can be produced with those inputs
    Production Function
  14. quantities of one or more production factors cannot be changed
    Short run
  15. The use of at least one factor of production cannot be changed
  16. All factors can be changed
  17. the total amount of medical ervices or goods produced
    Total Product
  18. Output per unit of particular product
    Average product
  19. extra product or output added by 1 extra unit of that input while other inputs are held constant
    Marginal product
  20. The average product increases as the labor increases
    MP > AP
  21. The average product is constant
    MP = AP
  22. The average product will fall as labor input increases
    MP < AP
  23. By holding one of the inputs constant except for one and continually increasing the other input, a point will be arrived at certain point wherein the rate in the increase of output will fall
    Law of Diminishing Marginal Returns
  24. output will decrease even if there is an increase in one of the inputs
    Law of Diminishing Marginal Returns
  25. The three stages of production
    • Stage I
    • Stage II
    • Stage III
  26. Production starts at the origin until the highest portion of the average product
    Stage I
  27. Highest portion of average product until marginal product is zero
    State II
  28. Begins where the marginal product is zero until its negative range
    Stage III
  29. a process of determining the output by employing the two variables such as capital and labor
    Production with two variable inputs
  30. a curve which shows all the possible combinations of inputs that yield the same level of output
  31. Characteristics of isoquants
    • Isoquants further from the origin represent greater output levels
    • Isoquants do not intersect
    • Isoquants are usually convex to the origin
    • Isoquants are negatively sloped
  32. a producer is willing to give up less and less capital to gain additional amount of labor and still lie on the same isoquant
    Marginal rate of technical substitution
  33. a straight line showing the different combinations of capital and labor that a firm can purchase or hire given his total outlay and the factor prices
  34. a series of isocost lines
    Isocost map
  35. Relates the change in output to a proportionate change in the amount f input used
    Return to scale
  36. if doubling all inputs causes output to increase more than double
    Increasing return to scale
  37. if doubling all inputs causes doubling of output
    Constant return to scale
  38. if doubling all inputs result to less that double output
    Deecreasing return of scale
Card Set
Chapter 7
Production Concept in Health Care