Producer Behaviour and Supply Test - 1

In the short run, only the variable factors can be changed. Fixed factors cannot be changed in the short run. 

In the long run all the factors can be changed. All the factors (variable and fixed) become variable factors in the long run. 

In the short run variable factors like labour, raw materials can be changed easily. It is difficult to change fixed factors like land, machinery, equipments, etc in the short period as procuring/selling land or machinery or capital will take time and it is difficult to change them in the short period.

The change in total product is due to the change brought about by an additional unit produced, which is the marginal product.  Since fixed cost do not change, it is only the change in variable factors which is reflected in the marginal product. and the change in total product depends upon the change in marginal product.

It is inverse U shaped because the initially the total product increases at a increasing rate, and then it increases at a diminishing rate and finally the total product starts decreasing.

It is because Average product increases at an increasing rate, then it starts decreasing in the second stage and continues to decrease in the third stage but AP will always be positive.

When production cost is expressed in terms of monetary units, it is called money cost.