AP Microeconomics - Unit 3 - Assignment Essays

question

Firms' __1__ and __2__ constraints over different input and output levels shape optimal decisions in the short run and long run

answer

1. Production
2. Cost

question

The _____ explains the relationship between inputs and outputs both in the short run and the long run

answer

Production function

question

Marginal product and average product change as _____ changes, and hence total product changes

answer

Input usage

question

_____ occur as the firm employ's more of one input, holding other inputs constant, to produce a product (output) in the short run

answer

Diminishing marginal returns

question

In the long run, all resources are_____

answer

Variable

question

In the short run, all resources are _____

answer

Fixed

question

In the short-run, as variable inputs are added to fixed inputs, production first increases at an increasing rate; then, production increases at a decreasing rate. Later, there is a decrease in total production, as successively equal increments of variable inputs are added - this is _____

answer

The law of diminishing marginal returns

question

Marginal Product (MP) always intersects Average Product (AP) at AP's _____

answer

Highest point

question

Physical plants, ovens and any other costly capital goods are all _____

answer

Fixed inputs

question

Laborers, the inventory, and the amount of electricity used are all _____

answer

Variable inputs

question

Fixed costs and variable costs determine _____

answer

The total cost

question

Marginal cost, average (fixed, variable, and total) cost, total cost, and total variable cost __1__ as total output changes, but total fixed cost __2__

answer

1. Change
2. Remains constant at all

question

Production function with diminishing marginal returns yield an _____ marginal cost curve

answer

Upward-sloping

question

Specialization and the division of labor _____ marginal costs for firms

answer

Reduce

question

Cost curves can _____ in response to changes in input costs and productivity

answer

Shift

question

Fixed inputs lead to __1__ costs
Variable inputs lead to __2__ costs

answer

1. Fixed
2. Variable

question

Total cost (TC) formula

answer

Fixed costs (FC) + Variable costs (VC)

question

What are the 7 cost measures?

answer

1. Total fixed cost
2. Total variable cost
3. Total cost (TC)
4. Marginal cost (MC)
5. Average fixed cost (AFC)
6. Average variable cost (AVC)
7. Average total cost (ATC)

question

When the marginal curves are greater than the averages, the averages must be _____

answer

Increasing

question

The MP intersects AP at the __1__ point on AP
The MP intersects AVC at the __2__ point on the AVC

answer

1. Maximum
2. Minimum

question

In the long-run, firms can adjust all their inputs, and as a result, all costs become _____

answer

Variable

question

The relationship between inputs and outputs in the long-run is described by the _____ increasing, decreasing, or constant returns to scale

answer

Scale of production

question

The long-run average total cost is characterized by economies of scale, diseconomies of scale, or constant returns to scale (_____)

answer

Efficient scale

question

The minimum efficient scale plays a role in determining the _____ in a market and the market structure

answer

Concentration of firms

question

When do economies of scale occur?

answer

When the long-run average total cost curve decreases as output increases. Equivalent to increasing returns to scale

question

When do constant returns to scale occur?

answer

When the long-run average total cost curve remains constant as production increases or decreases

question

When do diseconomies of scale occur?

answer

When the long-run average total cost curve increases as a firm's output increases. Equivalent to decreasing returns to scale

question

To determine the optimal level at which to pursue an activity whose total benefits exceed total cost, rational economic agents compare __1__ and __2__

answer

1. Marginal benefits
2. Marginal costs

question

Firms respond to economic profit (loss) rather than _____

answer

Accounting profit

question

Accounting profit fails to account for implicit costs (such as cost of financial capital, compensation for risk, or an entrepreneur's time) which is fully compensated in _____

answer

Normal profit

question

Zero economic profit is when

answer

Resources could not be put in better use

question

What is the outcome when TR>TC or ATC<price?

answer

Economic and accounting profit

question

What is the outcome when TR=TC or ATC=price?

answer

Normal (zero) economic profit and accounting profits

question

What is the outcome when TR<TC or ATC>price?

answer

Economic losses and accounting profit could be positive, or zero, depending on explicit costs (without implicit)

question

Firms are assumed to produce output to maximize their profits by comparing __1__ and __2__

answer

1. Marginal revenue
2. Marginal cost

question

What is the profit-maximization rule?

answer

Marginal cost (MC) = Marginal revenue (MR)

question

What does the profit-maximization rule state?

answer

A business produces where marginal revenue equal marginal cost

question

With what is profit calculated?

answer

With total cost and total revenue

question

Firm's short-run decisions to produce output, and long-run decisions to enter or exit a market, are based on _____

answer

Profitability

question

In the short run, firms decide to operate (i.e. produce positive output) or shut down (i.e. produce zero output) by comparing total revenue to total variable cost or price to _____

answer

Average variable cost (AVC)

question

In the absence of barriers to entry or exit, in the long-run (i.e. once factors that are fixed in the short run become variable), firms enter a market in which there are __1__ opportunities or exit a market when they anticipate __2__

answer

1. Profit-making
2. Economic losses

question

Business produces with profit
MR = MC = P > ATC

answer

In the short-run, firms continue to produce. In the long-run, firms will enter the market and push the market price down

question

Business produces at Break Even
MR = MC = P = ATC

answer

(Normal economic profit)
Business will continue to operate in the short-run and stay in the market in the long run

question

Business produces at a loss
MR = MC = P < ATC

answer

Business will continue to operate in the short-run to minimize their losses. They will leave the market in the long run

question

Business shuts down
MR = MC = P < AVC

answer

Business have to incentive to operate even in the short-run and should shut down immediately

question

Even with a common goal of profit-maximization, _____ constraints and influences prices, output, and efficiency

answer

Market Structure

question

A perfectly competitive market is _____. Firms in a perfectly competitive markets face no barriers to entry and have no market power

answer

Efficient

question

In perfectly competitive markets, firms can sell all their outputs at a constant price determined by the _____

answer

Market

question

In perfectly competitive markets, prices communicate to consumers and producers the magnitude of others' __1__ of productions and __2__ of consumption and provide incentives to act on that information (i.e. price equals marginal cost in an efficient market)

answer

1. Marginal costs
2. Marginal benefits

question

At a competitive market equilibrium, firms are _____ and select output to maximize profit by producing the level of output where the marginal cost equals marginal revenue (at the price).

answer

Price-takers

question

At a competitive market equilibrium, the price of a product equals both the __1__ received by the last unit consumed and the __2__ incurred to produce the last unit, thus achieving allocative efficiency

answer

1. Private marginal benefit
2. Private marginal cost

question

In a _____ competitive equilibrium, price can either be above or below its long-run competitive level resulting in profits or losses, motivating entry or exit of firms and moving prices and quantities toward long-run equilibrium

answer

Short-run

question

In a _____ perfectly competitive equilibrium productive efficiency implies all operating firms produce at efficient scale, price equals marginal cost and minimal average total cost, and firms gain zero economic profit

answer

Long-run

question

Firms may be in a constant cost, increasing cost, or decreasing cost industry. Long-run prices depend on the portion of the long-run cost curves on which firms _____

answer

Operate

question

A perfectly competitive market in long-run equilibrium is __1__ and __2__ efficient

answer

1. Allocatively
2. Productively

question

What are the characteristics of the perfectly competitive market?

answer

1. Many firms
2. Price taking
3. No barriers
4. Identical products
5. Perfect knowledge

question

What does it mean when a market is allocatively efficient?

answer

The exact amount of a product that society desires is being made. P=MC

question

What does it mean when a market is productively efficient?

answer

Goods are being produced at the lowest possible cost using the fewest possible resources. P = minimum ATC

1 of 58

question

Firms' __1__ and __2__ constraints over different input and output levels shape optimal decisions in the short run and long run

answer

1. Production
2. Cost

question

The _____ explains the relationship between inputs and outputs both in the short run and the long run

answer

Production function

question

Marginal product and average product change as _____ changes, and hence total product changes

answer

Input usage

question

_____ occur as the firm employ's more of one input, holding other inputs constant, to produce a product (output) in the short run

answer

Diminishing marginal returns

question

In the long run, all resources are_____

answer

Variable

question

In the short run, all resources are _____

answer

Fixed

question

answer

The law of diminishing marginal returns

question

Marginal Product (MP) always intersects Average Product (AP) at AP's _____

answer

Highest point

question

Physical plants, ovens and any other costly capital goods are all _____

answer

Fixed inputs

question

Laborers, the inventory, and the amount of electricity used are all _____

answer

Variable inputs

question

Fixed costs and variable costs determine _____

answer

The total cost

question

Marginal cost, average (fixed, variable, and total) cost, total cost, and total variable cost __1__ as total output changes, but total fixed cost __2__

answer

1. Change
2. Remains constant at all

question

Production function with diminishing marginal returns yield an _____ marginal cost curve

answer

Upward-sloping

question

Specialization and the division of labor _____ marginal costs for firms

answer

Reduce

question

Cost curves can _____ in response to changes in input costs and productivity

answer

Shift

question

Fixed inputs lead to __1__ costs
Variable inputs lead to __2__ costs

answer

1. Fixed
2. Variable

question

Total cost (TC) formula

answer

Fixed costs (FC) + Variable costs (VC)

question

What are the 7 cost measures?

answer

1. Total fixed cost
2. Total variable cost
3. Total cost (TC)
4. Marginal cost (MC)
5. Average fixed cost (AFC)
6. Average variable cost (AVC)
7. Average total cost (ATC)

question

When the marginal curves are greater than the averages, the averages must be _____

answer

Increasing

question

The MP intersects AP at the __1__ point on AP
The MP intersects AVC at the __2__ point on the AVC

answer

1. Maximum
2. Minimum

question

In the long-run, firms can adjust all their inputs, and as a result, all costs become _____

answer

Variable

question

The relationship between inputs and outputs in the long-run is described by the _____ increasing, decreasing, or constant returns to scale

answer

Scale of production

question

The long-run average total cost is characterized by economies of scale, diseconomies of scale, or constant returns to scale (_____)

answer

Efficient scale

question

The minimum efficient scale plays a role in determining the _____ in a market and the market structure

answer

Concentration of firms

question

When do economies of scale occur?

answer

When the long-run average total cost curve decreases as output increases. Equivalent to increasing returns to scale

question

When do constant returns to scale occur?

answer

When the long-run average total cost curve remains constant as production increases or decreases

question

When do diseconomies of scale occur?

answer

When the long-run average total cost curve increases as a firm's output increases. Equivalent to decreasing returns to scale

question

To determine the optimal level at which to pursue an activity whose total benefits exceed total cost, rational economic agents compare __1__ and __2__

answer

1. Marginal benefits
2. Marginal costs

question

Firms respond to economic profit (loss) rather than _____

answer

Accounting profit

question

Accounting profit fails to account for implicit costs (such as cost of financial capital, compensation for risk, or an entrepreneur's time) which is fully compensated in _____

answer

Normal profit

question

Zero economic profit is when

answer

Resources could not be put in better use

question

What is the outcome when TR>TC or ATC<price?

answer

Economic and accounting profit

question

What is the outcome when TR=TC or ATC=price?

answer

Normal (zero) economic profit and accounting profits

question

What is the outcome when TR<TC or ATC>price?

answer

Economic losses and accounting profit could be positive, or zero, depending on explicit costs (without implicit)

question

Firms are assumed to produce output to maximize their profits by comparing __1__ and __2__

answer

1. Marginal revenue
2. Marginal cost

question

What is the profit-maximization rule?

answer

Marginal cost (MC) = Marginal revenue (MR)

question

What does the profit-maximization rule state?

answer

A business produces where marginal revenue equal marginal cost

question

With what is profit calculated?

answer

With total cost and total revenue

question

Firm's short-run decisions to produce output, and long-run decisions to enter or exit a market, are based on _____

answer

Profitability

question

In the short run, firms decide to operate (i.e. produce positive output) or shut down (i.e. produce zero output) by comparing total revenue to total variable cost or price to _____

answer

Average variable cost (AVC)

question

answer

1. Profit-making
2. Economic losses

question

Business produces with profit
MR = MC = P > ATC

answer

In the short-run, firms continue to produce. In the long-run, firms will enter the market and push the market price down

question

Business produces at Break Even
MR = MC = P = ATC

answer

(Normal economic profit)
Business will continue to operate in the short-run and stay in the market in the long run

question

Business produces at a loss
MR = MC = P < ATC

answer

Business will continue to operate in the short-run to minimize their losses. They will leave the market in the long run

question

Business shuts down
MR = MC = P < AVC

answer

Business have to incentive to operate even in the short-run and should shut down immediately

question

Even with a common goal of profit-maximization, _____ constraints and influences prices, output, and efficiency

answer

Market Structure

question

A perfectly competitive market is _____. Firms in a perfectly competitive markets face no barriers to entry and have no market power

answer

Efficient

question

In perfectly competitive markets, firms can sell all their outputs at a constant price determined by the _____

answer

Market

question

answer

1. Marginal costs
2. Marginal benefits

question

At a competitive market equilibrium, firms are _____ and select output to maximize profit by producing the level of output where the marginal cost equals marginal revenue (at the price).

answer

Price-takers

question

answer

1. Private marginal benefit
2. Private marginal cost

question

answer

Short-run

question

answer

Long-run

question

Firms may be in a constant cost, increasing cost, or decreasing cost industry. Long-run prices depend on the portion of the long-run cost curves on which firms _____

answer

Operate

question

A perfectly competitive market in long-run equilibrium is __1__ and __2__ efficient

answer

1. Allocatively
2. Productively

question

What are the characteristics of the perfectly competitive market?

answer

1. Many firms
2. Price taking
3. No barriers
4. Identical products
5. Perfect knowledge

question

What does it mean when a market is allocatively efficient?

answer

The exact amount of a product that society desires is being made. P=MC

question

What does it mean when a market is productively efficient?

answer

Goods are being produced at the lowest possible cost using the fewest possible resources. P = minimum ATC

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order

AP Microeconomics – Unit 3

Order an Essay Now & Get These Features For Free: