Chapter 10 + 11 - Assignment Essays

question

a firm

answer

is an institution that hires factors of production and organizes them to produce and sell good and services. goal is maximize profit

question

technological efficiency

answer

occurs when a firm uses the least amount of inputs to produce a given quantity of output. different combinations of inputs to produce a good but only one is efficient.

question

economic efficiency

answer

occurs when the firm produces a given quantity of output at the least cost.

question

technical efficiency concerns the quantity of inputs used in production for a given quantity of output where economic is concerned about the cost of the input used.

answer

...

question

changes in the input price influence the value of the inputs, but not the technological process for using them in production.

answer

...

question

perfect competion

answer

many firms and buyers. no restrictions to enter and both buys and sellers know the price. markets for wheat, corn and grains

question

monopolistic completion

answer

many firms, each firm is similar but has different products. own element of power and no restrictions

question

oligopoly

answer

small number of firms, might produce identical products or different products . barrier to enter the market

question

monopoly

answer

one firm produces the entire industry and no substitutes for the product. there are barriers to enter. can be local like gas and water suppliers

question

the four firm concentration ratio

answer

% of the total industry sales accounted for by the 4 largest firms in the industry

question

the herfindahl- index

answer

the square % market share of each firm summed over the largest 50 firms in the industry.

question

the HHI index became a poplar measure of the degree of concentration to classify markets.

answer

when it is less than 1500 then it is highly competitive, when 1500-2500 it is moderate. when it is greater than 2500 highly concentrated

question

four firm concentration

answer

0 is perfect competition and 100 for monopolies

question

the short run

answer

is a time frame in which the quantity of one or more resources used in production is fixed. most firms capital is fixed. labor and materials can be changed. can be reversed

question

long run

answer

is a time frame which the quantities of all resources can be varied. not reversed.

question

to increase output in the short run, a firm must increase the amount of labor employed.

answer

...

question

total product

answer

is the total output produced in a given period. max output that can be produced.

question

marginal product of labor

answer

is the change in total product that results from one-unit increase in the quantity of labor employed, with all other inputs remaining the same.

question

the average product of labor

answer

is equal to total product divided by the quantity of labor employed.

question

as the quantity of labor employed increases:

answer

total product increases, marginal product initially increases and eventually decrease. Average product decreases.

question

product curves

answer

show how the firms total product, marginal product and average product change as the firm varies the quantity of labor employed.

question

initially the marginal product of a worker exceeds the marginal product of the previous worker. happens when there is an increase in specialization and division of labor.

answer

increasing marginal returns

question

marginal product of a worker is less than marginal product of the previous worker. arises when addtional worker has less access to capital and less space to work.

answer

diminishing marginal returns

question

law of diminishing returns

answer

as firm uses more of a variable input with a given fixed quantity of fixed inputs the marginal product of inputs eventually diminishes.

question

when marginal product exceeds average product, average product increases

answer

...

question

when marginal product is below average, average product decreases

answer

...

question

when Marginal product equals average product it is at its max.

answer

...

question

total cost

answer

cost of all resources. split into total fixed costs and variable costs.

question

total fixed costs

answer

costs of the firms fixed inputs. cost doesn't change with output

question

total variable cost

answer

is the cost of the firms variable inputs. costs do change with output

question

tp curve gets steeper at low output levels and less steep at high output levels

answer

...

question

the TVC- becomes steep at low output and steeper at high output levels.

answer

...

question

marginal cost-

answer

is the increase in total cost that results from one unit

question

over the output range with increasing marginal returns, marginal cost falls as output increases

answer

...

question

over the output range with diminishing marginal returns, marginal cost rises as output increases

answer

...

question

average total cost

answer

is the total cost per unit of output.

question

average fixed cost

answer

is total cost per unit of ouput

question

average variable cost

answer

is total variable cost per unit of output

question

average total cost

answer

total cost per unit of output.

question

Why the ATC curve is u-shaped?

answer

spreading total fixed costs over a larger output- AFC curve slopes downward as output increases.
2. eventually diminishing returns- the AVC curve slopes upward and AVC increases more quickly than AFC is decreasing

question

firms cost curves and product curves are linked

answer

mc is at its minimum at the same output level at which Mp is at its max
--when mp is rising mC is falling

question

AVC is at its mininum

answer

at the same output level at which AP is at its maximum

question

when AP is rising AVC is falling

answer

...

question

technology changes the product curves and cost curves

answer

an increase shifts the product curve up and cost down

question

with more technology and firm uses more capital and less labor

answer

fixed cost increases and variable decreases

question

for tech: ATC increases at low output and decreases at high levels

answer

...

question

an increase in price increases costs and shifts the cost curves.

answer

increase in FC shifts total cost and ATC up but to the MC curve

question

increase in variable cost shifts

answer

total cost, ATC and MC curves upward

question

Long Run: Production function

answer

is the relationship between the max output attainable and the quantities of both capital and labor.

question

marginal product of capital

answer

is the increase in output resulting from one unit increase in the amount of capital employed, holding labor employed constant.

question

the long-run average cost

answer

is the relationship between the lowest attainable ATC and output when both the plant and labor are varied

question

economic of scales

answer

the long run average cost curve slopes downward

question

diseconomies scale

answer

long run average cost curve slopes upward

question

minimum effect scale

answer

is the smallest quantity of output at which the long run average cost reaches its lowest level.

question

law of dimishing returns

answer

output produced by each additional worker is successively smaller. to produce one more unit, more workers are required and cost of producing the addtiona unit increases.

question

the larger the output, the larger is the plant that will minimize average total cost. long run

answer

...

1 of 56

question

a firm

answer

is an institution that hires factors of production and organizes them to produce and sell good and services. goal is maximize profit

question

technological efficiency

answer

occurs when a firm uses the least amount of inputs to produce a given quantity of output. different combinations of inputs to produce a good but only one is efficient.

question

economic efficiency

answer

occurs when the firm produces a given quantity of output at the least cost.

question

technical efficiency concerns the quantity of inputs used in production for a given quantity of output where economic is concerned about the cost of the input used.

answer

...

question

changes in the input price influence the value of the inputs, but not the technological process for using them in production.

answer

...

question

perfect competion

answer

many firms and buyers. no restrictions to enter and both buys and sellers know the price. markets for wheat, corn and grains

question

monopolistic completion

answer

many firms, each firm is similar but has different products. own element of power and no restrictions

question

oligopoly

answer

small number of firms, might produce identical products or different products . barrier to enter the market

question

monopoly

answer

one firm produces the entire industry and no substitutes for the product. there are barriers to enter. can be local like gas and water suppliers

question

the four firm concentration ratio

answer

% of the total industry sales accounted for by the 4 largest firms in the industry

question

the herfindahl- index

answer

the square % market share of each firm summed over the largest 50 firms in the industry.

question

the HHI index became a poplar measure of the degree of concentration to classify markets.

answer

when it is less than 1500 then it is highly competitive, when 1500-2500 it is moderate. when it is greater than 2500 highly concentrated

question

four firm concentration

answer

0 is perfect competition and 100 for monopolies

question

the short run

answer

is a time frame in which the quantity of one or more resources used in production is fixed. most firms capital is fixed. labor and materials can be changed. can be reversed

question

long run

answer

is a time frame which the quantities of all resources can be varied. not reversed.

question

to increase output in the short run, a firm must increase the amount of labor employed.

answer

...

question

total product

answer

is the total output produced in a given period. max output that can be produced.

question

marginal product of labor

answer

is the change in total product that results from one-unit increase in the quantity of labor employed, with all other inputs remaining the same.

question

the average product of labor

answer

is equal to total product divided by the quantity of labor employed.

question

as the quantity of labor employed increases:

answer

total product increases, marginal product initially increases and eventually decrease. Average product decreases.

question

product curves

answer

show how the firms total product, marginal product and average product change as the firm varies the quantity of labor employed.

question

initially the marginal product of a worker exceeds the marginal product of the previous worker. happens when there is an increase in specialization and division of labor.

answer

increasing marginal returns

question

marginal product of a worker is less than marginal product of the previous worker. arises when addtional worker has less access to capital and less space to work.

answer

diminishing marginal returns

question

law of diminishing returns

answer

as firm uses more of a variable input with a given fixed quantity of fixed inputs the marginal product of inputs eventually diminishes.

question

when marginal product exceeds average product, average product increases

answer

...

question

when marginal product is below average, average product decreases

answer

...

question

when Marginal product equals average product it is at its max.

answer

...

question

total cost

answer

cost of all resources. split into total fixed costs and variable costs.

question

total fixed costs

answer

costs of the firms fixed inputs. cost doesn't change with output

question

total variable cost

answer

is the cost of the firms variable inputs. costs do change with output

question

tp curve gets steeper at low output levels and less steep at high output levels

answer

...

question

the TVC- becomes steep at low output and steeper at high output levels.

answer

...

question

marginal cost-

answer

is the increase in total cost that results from one unit

question

over the output range with increasing marginal returns, marginal cost falls as output increases

answer

...

question

over the output range with diminishing marginal returns, marginal cost rises as output increases

answer

...

question

average total cost

answer

is the total cost per unit of output.

question

average fixed cost

answer

is total cost per unit of ouput

question

average variable cost

answer

is total variable cost per unit of output

question

average total cost

answer

total cost per unit of output.

question

Why the ATC curve is u-shaped?

answer

question

firms cost curves and product curves are linked

answer

mc is at its minimum at the same output level at which Mp is at its max
--when mp is rising mC is falling

question

AVC is at its mininum

answer

at the same output level at which AP is at its maximum

question

when AP is rising AVC is falling

answer

...

question

technology changes the product curves and cost curves

answer

an increase shifts the product curve up and cost down

question

with more technology and firm uses more capital and less labor

answer

fixed cost increases and variable decreases

question

for tech: ATC increases at low output and decreases at high levels

answer

...

question

an increase in price increases costs and shifts the cost curves.

answer

increase in FC shifts total cost and ATC up but to the MC curve

question

increase in variable cost shifts

answer

total cost, ATC and MC curves upward

question

Long Run: Production function

answer

is the relationship between the max output attainable and the quantities of both capital and labor.

question

marginal product of capital

answer

is the increase in output resulting from one unit increase in the amount of capital employed, holding labor employed constant.

question

the long-run average cost

answer

is the relationship between the lowest attainable ATC and output when both the plant and labor are varied

question

economic of scales

answer

the long run average cost curve slopes downward

question

diseconomies scale

answer

long run average cost curve slopes upward

question

minimum effect scale

answer

is the smallest quantity of output at which the long run average cost reaches its lowest level.

question

law of dimishing returns

answer

output produced by each additional worker is successively smaller. to produce one more unit, more workers are required and cost of producing the addtiona unit increases.

question

the larger the output, the larger is the plant that will minimize average total cost. long run

answer

...

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