Ap Econ Unit 3 and 4 - Assignment Essays

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

When total product maximized

answer

Marginal product = zero

question

diminishing marginal returns

answer

If at least one input is held fixed, while other inputs are variable, output increases at a diminishing rate

question

fixed costs

answer

Costs that do not change with the rate of production

question

Examples of a fixed cost

answer

rent and salaries

question

variable costs

answer

costs that vary with the level of production

question

Examples of variable costs

answer

Wages and utilities

question

implicit costs

answer

Opportunity cost - what the business could have done with the money

question

explicit costs

answer

Cash payments - costs that require a firm to spend money

question

marginal cost

answer

The additional cost from hiring each additional unit of labor

question

change in total cost / change in quantity

answer

Equation for marginal cost

question

Fixed cost + variable cost

answer

Equation for total cost

question

fixed cost / quantity

answer

Avg fixed cost equation

question

Variable cost / quantity

answer

Avg variable cost equation

question

Marginal cost graph

answer

...

question

Does MC go through the bottom or top of ATC and AVC curves

answer

Bottom

question

AVC gets closer to ATC as Quantity increases. What is this due to?

answer

AFC is falling as Q increases

question

Diminishing marginal returns can be seen where on a MC graph

answer

When MC begins rising

question

rule for short run

answer

At least one cost is held fixed

question

Rule for Long run

answer

All costs are variable

question

economies of scale

answer

as production increases, the long-run avg total cost decreases

question

Constant returns to scale

answer

Shows long-run ATC. Remaining constant as output increases

question

diseconomies of scale

answer

Long-run ATC curve increases as output increases. Basically the LATC is being driven up quantity produced is increasing.

question

accounting profit

answer

total revenue minus total explicit cost

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting profit must be (larger or smaller) than economic profit

answer

Larger

question

Why does accounting profit need to be larger than economic profit

answer

There is always opportunity costs

question

normal profit = ? of Economic profit

answer

zero

question

comparing marginal costs and marginal benefits

answer

how do firms attempt to maximize profit?

question

where marginal revenue equals marginal cost

answer

In order to maximize profits, a perfect competitor will produce the quantity of output where

question

as long as P > AVC or total revenue > TVC

answer

when will firms opporate in the short run?

question

P < AVC in the long-run

answer

When will firms shut down?

question

If there are profit-making opportunities

answer

When will firms enter a market?

question

Up, because the total cost of the good will increase, meaning the cost-per-unit will increase.

answer

Will an increase in variable cost cause the marginal cost curve shift up or down? Why?

question

Up, because you have to pay extra money for ever unit.

answer

Will a per-unit tax on a good cause the marginal cost curve to shift up or down? Why?

question

Not change

answer

Do fixed costs cause the MC curve to shift up, down, or will it not change.

question

Down

answer

If labor gets more productive in a firm, will the MC curve shift up, down, or not change?

question

Down, because the cost for every unit decreases.

answer

If a per-unit subsidy is given to a firm, will the MC curve shift up, down, or neither? Why?

question

Neither

answer

Does a lump-sum tax/subsidy cause the MC curve to shift up, down, or neither?

question

lump sum subsidy

answer

Subsidy paid out in one payment, causing an increase in profit; it lowers the firm's fixed cost but DOES NOT change its marginal cost and will therefore not affect its profit maximizing output

question

P = MC

answer

allocative efficiency

question

Economic profit

answer

If ATC is below demand curve in a perfectly competitive market, will there be economic profit or loss?

question

Loss

answer

If ATC is above demand curve in a perfectly competitive market, will there be economic profit or loss?

question

Price-takers

answer

Are perfectly competitive firms price-takers or givers

question

answer

Are there barriers to entry in a perfectly competitive firm?

question

Yes, they don't have an opportunity cost.

answer

If a firm is making zero economic profit, are they still making money?

question

increase

answer

If firms enter a market due to the existence of profit, will ATC increase, decrease, or not change if they are competing for resources?

question

Bottom of ATC cost curve

answer

Where is productivity efficiency located on a graph?

question

Price-makers

answer

Are imperfectly competitive firms price-takers or price-makers?

question

Lower price

answer

In order to increase outputs, what must imperfectly competitive markets do?

question

No, P must equal MC

answer

If price is greater than MC, will imperfectly competitive firms be able to produce at allocative efficient levels?

question

Produce too little and charge too much

answer

From a societal standpoint, do imperfectly competitive markets produce too little or too much? And do they charge too high or too low a price?

question

to keep other firms from entering the market

answer

Why do barriers to entry exist in a imperfectly competitive market?

question

Patent

answer

(n.) exclusive rights over an invention; copyright

question

Per unit tax

answer

What is a tax on each unit of a product sold and makes MC curve shift up?

question

lump-sum tax

answer

a tax that is the same amount for every person and is a one time payment — makes the ATC curve shift up.

question

Lump-sum subsidy

answer

Subsidy paid out in one payment, causing an increase in profit; it lowers the firm's fixed cost but DOES NOT change its marginal cost and will therefore not affect its profit maximizing output

question

Decrease because it reduces the good's price.

answer

Does a subsidy given to a monopoly increase or decrease deadweight loss? Why?

question

Decreases price and increase output

answer

a per unit subsidy (increase/decrease) price and (increase/decrease) output.

question

MC shifts down

answer

How does a per unit subsidy affect the MC curve?

question

economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

Yes

answer

In a natural monopoly, can governments regulate which price they can charge?

question

Lump-sum subsidy

answer

What must be given to a natural monopoly in order to produce at an allocative efficient quantity?

1 of 63

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

When total product maximized

answer

Marginal product = zero

question

diminishing marginal returns

answer

If at least one input is held fixed, while other inputs are variable, output increases at a diminishing rate

question

fixed costs

answer

Costs that do not change with the rate of production

question

Examples of a fixed cost

answer

rent and salaries

question

variable costs

answer

costs that vary with the level of production

question

Examples of variable costs

answer

Wages and utilities

question

implicit costs

answer

Opportunity cost - what the business could have done with the money

question

explicit costs

answer

Cash payments - costs that require a firm to spend money

question

marginal cost

answer

The additional cost from hiring each additional unit of labor

question

change in total cost / change in quantity

answer

Equation for marginal cost

question

Fixed cost + variable cost

answer

Equation for total cost

question

fixed cost / quantity

answer

Avg fixed cost equation

question

Variable cost / quantity

answer

Avg variable cost equation

question

Marginal cost graph

answer

...

question

Does MC go through the bottom or top of ATC and AVC curves

answer

Bottom

question

AVC gets closer to ATC as Quantity increases. What is this due to?

answer

AFC is falling as Q increases

question

Diminishing marginal returns can be seen where on a MC graph

answer

When MC begins rising

question

rule for short run

answer

At least one cost is held fixed

question

Rule for Long run

answer

All costs are variable

question

economies of scale

answer

as production increases, the long-run avg total cost decreases

question

Constant returns to scale

answer

Shows long-run ATC. Remaining constant as output increases

question

diseconomies of scale

answer

Long-run ATC curve increases as output increases. Basically the LATC is being driven up quantity produced is increasing.

question

accounting profit

answer

total revenue minus total explicit cost

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting profit must be (larger or smaller) than economic profit

answer

Larger

question

Why does accounting profit need to be larger than economic profit

answer

There is always opportunity costs

question

normal profit = ? of Economic profit

answer

zero

question

comparing marginal costs and marginal benefits

answer

how do firms attempt to maximize profit?

question

where marginal revenue equals marginal cost

answer

In order to maximize profits, a perfect competitor will produce the quantity of output where

question

as long as P > AVC or total revenue > TVC

answer

when will firms opporate in the short run?

question

P < AVC in the long-run

answer

When will firms shut down?

question

If there are profit-making opportunities

answer

When will firms enter a market?

question

Up, because the total cost of the good will increase, meaning the cost-per-unit will increase.

answer

Will an increase in variable cost cause the marginal cost curve shift up or down? Why?

question

Up, because you have to pay extra money for ever unit.

answer

Will a per-unit tax on a good cause the marginal cost curve to shift up or down? Why?

question

Not change

answer

Do fixed costs cause the MC curve to shift up, down, or will it not change.

question

Down

answer

If labor gets more productive in a firm, will the MC curve shift up, down, or not change?

question

Down, because the cost for every unit decreases.

answer

If a per-unit subsidy is given to a firm, will the MC curve shift up, down, or neither? Why?

question

Neither

answer

Does a lump-sum tax/subsidy cause the MC curve to shift up, down, or neither?

question

lump sum subsidy

answer

Subsidy paid out in one payment, causing an increase in profit; it lowers the firm's fixed cost but DOES NOT change its marginal cost and will therefore not affect its profit maximizing output

question

P = MC

answer

allocative efficiency

question

Economic profit

answer

If ATC is below demand curve in a perfectly competitive market, will there be economic profit or loss?

question

Loss

answer

If ATC is above demand curve in a perfectly competitive market, will there be economic profit or loss?

question

Price-takers

answer

Are perfectly competitive firms price-takers or givers

question

answer

Are there barriers to entry in a perfectly competitive firm?

question

Yes, they don't have an opportunity cost.

answer

If a firm is making zero economic profit, are they still making money?

question

increase

answer

If firms enter a market due to the existence of profit, will ATC increase, decrease, or not change if they are competing for resources?

question

Bottom of ATC cost curve

answer

Where is productivity efficiency located on a graph?

question

Price-makers

answer

Are imperfectly competitive firms price-takers or price-makers?

question

Lower price

answer

In order to increase outputs, what must imperfectly competitive markets do?

question

No, P must equal MC

answer

If price is greater than MC, will imperfectly competitive firms be able to produce at allocative efficient levels?

question

Produce too little and charge too much

answer

From a societal standpoint, do imperfectly competitive markets produce too little or too much? And do they charge too high or too low a price?

question

to keep other firms from entering the market

answer

Why do barriers to entry exist in a imperfectly competitive market?

question

Patent

answer

(n.) exclusive rights over an invention; copyright

question

Per unit tax

answer

What is a tax on each unit of a product sold and makes MC curve shift up?

question

lump-sum tax

answer

a tax that is the same amount for every person and is a one time payment — makes the ATC curve shift up.

question

Lump-sum subsidy

answer

Subsidy paid out in one payment, causing an increase in profit; it lowers the firm's fixed cost but DOES NOT change its marginal cost and will therefore not affect its profit maximizing output

question

Decrease because it reduces the good's price.

answer

Does a subsidy given to a monopoly increase or decrease deadweight loss? Why?

question

Decreases price and increase output

answer

a per unit subsidy (increase/decrease) price and (increase/decrease) output.

question

MC shifts down

answer

How does a per unit subsidy affect the MC curve?

question

economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

Yes

answer

In a natural monopoly, can governments regulate which price they can charge?

question

Lump-sum subsidy

answer

What must be given to a natural monopoly in order to produce at an allocative efficient quantity?

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