CHAPTER 7: Business Costs of Production

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Posted on

March 14th, 2023

question

answer

(Average Product)- output per unit of labor AP= total product/change in labor input

question

answer

(Total Product)- total quantity or output of a particular good or service produced.

question

answer

(Marginal Product)- the extra output or added product assosiated with adding a unit of a variable resource
MP=change in total product/change in labor input

question

Economic Profit

answer

Revenue-explicit costs-implicit costs

question

Accounting Profit

answer

Revenue-total explicit costs

question

Normal Profit

answer

...

question

answer

(total costs) total fixed(TFC)+total variable costs(TVC)

question

AFC

answer

(average fixed cost) AFC=TFC/Q

question

AVC

answer

(average variable costs) AVC= TVC/Q

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ATC

answer

(average total costs) ATC= AFC+AVC

question

answer

(marginal cost) the additional cost of producing one more unit of output MC= change in TC/change in Q

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Economies of Scale

answer

the downsloping part of a long run ATC curve and mnimum ATC occurs at low out put

question

Diseconomies of Scale

answer

difficulty controlling, coordinating a firms opperations because it has become too big.

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Constant returna to scale

answer

long run average cost does not change

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MES

answer

(minimum efficient scale) lowest level of output at which a firm can minimize long-run average costs.

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Monopoly

answer

average total cost is minimized when only one firm produces a particular good or service.

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Pure Competition

answer

a large number of firms producing a standardized product with each output being identical.

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MR in pure competitoin ='s

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PRICE, becuse the producer isa price take.

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In the SHORT RUN a firm with maximize profit when:

answer

MR(marginal revenue)=MC(marginal cost)

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In a PURELY COMPETITIVE firm P(price)=

answer

MC(marginal Cost) becuase demand is perfectly elastic at market price so MR(marginal Revenue)=Price

question

To maximize profit or minimize loss a firm should produce at:

answer

the point where P=MC(marginal cost)
Because: if you multiple price ex:(131) by output (9) TR = 1179 an if ATC at 9 units is 97.78 then that gives us TC of 880. the difference is 1179-880=299 economic profit.

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Short-Run Loss

answer

where P(price) still exceeds the minimum AVC(avergae variable costs)

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Short-Run Shut down

answer

when P(price falls below minimum AVC. There is not level of output which the firm can produce that is less then their fixed cost.

question

Equilibrium Price

answer

MR=MC

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Productive efficiency (LONG RUN)

answer

Price will settle at minimum average total cost, P(MR)=minimumATC.
The good or service is being produced in the least costly way possible forced by pure competition.

question

When MC&ATC&MR(P) meet in the LONG RUN

answer

minimum ATC (normal profit)

1 of 26

question

answer

(Average Product)- output per unit of labor AP= total product/change in labor input

question

answer

(Total Product)- total quantity or output of a particular good or service produced.

question

answer

(Marginal Product)- the extra output or added product assosiated with adding a unit of a variable resource
MP=change in total product/change in labor input

question

Economic Profit

answer

Revenue-explicit costs-implicit costs

question

Accounting Profit

answer

Revenue-total explicit costs

question

Normal Profit

answer

...

question

answer

(total costs) total fixed(TFC)+total variable costs(TVC)

question

AFC

answer

(average fixed cost) AFC=TFC/Q

question

AVC

answer

(average variable costs) AVC= TVC/Q

question

ATC

answer

(average total costs) ATC= AFC+AVC

question

answer

(marginal cost) the additional cost of producing one more unit of output MC= change in TC/change in Q

question

Economies of Scale

answer

the downsloping part of a long run ATC curve and mnimum ATC occurs at low out put

question

Diseconomies of Scale

answer

difficulty controlling, coordinating a firms opperations because it has become too big.

question

Constant returna to scale

answer

long run average cost does not change

question

MES

answer

(minimum efficient scale) lowest level of output at which a firm can minimize long-run average costs.

question

Monopoly

answer

average total cost is minimized when only one firm produces a particular good or service.

question

Pure Competition

answer

a large number of firms producing a standardized product with each output being identical.

question

MR in pure competitoin ='s

answer

PRICE, becuse the producer isa price take.

question

In the SHORT RUN a firm with maximize profit when:

answer

MR(marginal revenue)=MC(marginal cost)

question

In a PURELY COMPETITIVE firm P(price)=

answer

MC(marginal Cost) becuase demand is perfectly elastic at market price so MR(marginal Revenue)=Price

question

To maximize profit or minimize loss a firm should produce at:

answer

question

Short-Run Loss

answer

where P(price) still exceeds the minimum AVC(avergae variable costs)

question

Short-Run Shut down

answer

when P(price falls below minimum AVC. There is not level of output which the firm can produce that is less then their fixed cost.

question

Equilibrium Price

answer

MR=MC

question

Productive efficiency (LONG RUN)

answer

Price will settle at minimum average total cost, P(MR)=minimumATC.
The good or service is being produced in the least costly way possible forced by pure competition.

question

When MC&ATC&MR(P) meet in the LONG RUN

answer

minimum ATC (normal profit)

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