Unit notes and practice questions

Grade 9 Economics unit 5: Introduction to Production and Cost

Everything here is for unit 5 of the Grade 9 Economics textbook: what the chapter covers, the short notes, practice questions with their answers, and the lesson video where one exists.

3
Cards: 10
Practice questions on unit 5: 62–76
The textbook pages for unit 5

What unit 5 covers

1.Definition of Production, Inputs and Outputs
2.Periods of Production
3.Cost of Production

Short notes for unit 5

The cards filed under this chapter on the Grade 9 Economics page. Open one at a time.

Economic CostFormula

\text{Economic Cost} = \text{Explicit Cost} + \text{Implicit Cost}

\text{Economic Cost} = \text{Explicit Cost} + \text{Implicit Cost}

$\text{Economic Cost}$: Total economic opportunity cost $Birr$
$\text{Explicit Cost}$: Actual monetary out-of-pocket payments to resource suppliers $Birr$
$\text{Implicit Cost}$: Estimated value of self-owned resources used in production $Birr$

When you use it

Use this relationship to determine total economic cost by including both direct cash expenses and the opportunity cost of owned resources.

Watch out

Accounting cost only measures explicit costs. Economic cost always includes implicit costs such as forgone rent or owner salary.

Drafted from Grade 9 Economics, pages 62-76, then checked twice before it went up

Product Curve RelationshipsReference tableMP > AP · MP = AP · MP < AP · +2

Condition	Behavior of Product Curves
$MP > AP$	$AP$ is rising
$MP = AP$	$AP$ is at its maximum
$MP < AP$	$AP$ is falling
$MP = 0$	$TP$ is at its maximum
$MP < 0$	$TP$ is declining

When you use it

Use this reference to identify how Total Product and Average Product behave based on the value of Marginal Product.

Watch out

Average Product reaches its maximum when Marginal Product equals Average Product, not when Marginal Product reaches its own maximum.

Drafted from Grade 9 Economics, pages 62-76, then checked twice before it went up

Short Run Total CostFormula

TC = TFC + TVC

TC = TFC + TVC

$TC$: Total cost of production $Birr$
$TFC$: Total fixed cost that does not change with output $Birr$
$TVC$: Total variable cost that changes with output $Birr$

When you use it

Use this formula to calculate the total cost incurred by a firm in the short run from its fixed and variable components.

Watch out

Total fixed cost is incurred even when output is zero, so total cost equals total fixed cost at zero output.

Drafted from Grade 9 Economics, pages 62-76, then checked twice before it went up

Practice questions on unit 5

10 multiple-choice questions written against this chapter, each with its answer and the reason. Try one before you open the answer.

Question 1

In economics, what is the definition of production?

A.The process of consuming finished goods and services
B.The process of transforming inputs into outputs
C.The process of setting market prices for goods
D.The process of borrowing funds from a bank

Show the answer and why

Answer: B The process of transforming inputs into outputs

Why

Production is defined as the process of transforming inputs into outputs, such as combining land, labor, and seeds to produce wheat.

Question 2

A period of production in which at least one input is fixed while other inputs are variable is known as the:

A.short run
B.long run
C.market period
D.planning horizon

Show the answer and why

Answer: A short run

Why

The short run refers to a period of production in which at least one input is fixed while the remaining inputs are variable.

Question 3

Which of the following is an example of an implicit cost for a bakery owner in Hawassa?

A.Monthly wages paid to hired bakers
B.Payment for sacks of flour bought from a supplier
C.The estimated rent of the owner's own building used for the bakery
D.Electricity bills paid to the utility office

Show the answer and why

Answer: C The estimated rent of the owner's own building used for the bakery

Why

Implicit costs are the values of non-purchased, self-owned resources used in production, such as the estimated rent of the owner's own building.

Question 4

A small workshop in Gondar has a total fixed cost (TFC) of 60 birr and a total variable cost (TVC) of 40 birr when making 2 tables. What is the total cost (TC)?

A.20 birr
B.60 birr
C.100 birr
D.120 birr

Show the answer and why

Answer: C 100 birr

Why

Total Cost is the sum of total fixed cost and total variable cost: TC = TFC + TVC. Here, 60 + 40 = 100 birr.

Question 5

According to the textbook, which of the following is classified as an intangible product?

A.Machinery
B.Health care
C.Vehicles
D.Equipment

Show the answer and why

Answer: B Health care

Why

Intangible products do not have a physical existence and cannot be touched. Examples include travel, insurance, consulting, education, and health care.

Question 6

What happens to the marginal product (MP) when total product (TP) reaches its maximum level?

A.MP reaches its maximum
B.MP equals average product
C.MP becomes zero
D.MP becomes negative

Show the answer and why

Answer: C MP becomes zero

Why

When total product (TP) reaches its maximum, the marginal product (MP) becomes zero. After this point, if TP declines, MP becomes negative.

Question 7

A teff farm in Debre Markos employs 4 workers and produces a total product of 76 quintals of teff. What is the average product of labor (AP)?

A.14 quintals per worker
B.19 quintals per worker
C.25 quintals per worker
D.76 quintals per worker

Show the answer and why

Answer: B 19 quintals per worker

Why

Average product is calculated by dividing total product by the number of workers: AP = TP / L = 76 / 4 = 19 quintals per worker.

Question 8

In economics, total economic cost is equal to:

A.explicit cost plus implicit cost
B.total fixed cost minus total variable cost
C.accounting cost minus explicit cost
D.average cost multiplied by marginal cost

Show the answer and why

Answer: A explicit cost plus implicit cost

Why

Economic cost includes both explicit costs (actual cash outlays) and implicit costs (the opportunity costs of self-owned resources): Economic cost = implicit cost + explicit cost.

Question 9

When the marginal product (MP) curve lies above the average product (AP) curve, what happens to average product?

A.AP is falling
B.AP is at its minimum
C.AP is at its maximum
D.AP is rising

Show the answer and why

Answer: D AP is rising

Why

So long as the MP curve lies above the AP curve (MP > AP), the average product (AP) curve slopes upward and AP is rising.

Question 10

A shoe workshop in Addis Ababa has a total cost of 120 birr when producing 3 pairs of shoes and 125 birr when producing 4 pairs of shoes. What is the marginal cost (MC) of the 4th pair?