Chapter 8 Econ Textbook Notes - Assignment Essays

question

business firm

answer

an entity that employs factors of production (resources) to produce goods and services to be sold to consumers, other firms, or the government.

question

market coordinator

answer

The process in which individuals perform tasks, such as producing certain quantities of goods, on the basis of changes in market forces, such as supply, demand, and price.

question

managerial coordination

answer

The process in which managers direct employees to perform certain tasks.

question

shirking

answer

The behavior of a worker who is putting forth less than the agreed-to effort.

question

monitor

answer

A person in a business firm who coordinates team production and reduces shirking.

question

residual claimant

answer

person who share in the profits of a business firm

question

In the theory of the firm, the exchanges take place at two levels:

answer

1)at the level of individuals coming together to form a team
2)at the level of workers choosing a monitor.

question

utility function

answer

subjective, not observable, no peak

question

production function

answer

objective, measurable, there is a peak

question

horizontal axis

answer

labor

question

line on graph

answer

capital

question

profit

answer

The difference between total revenue and total cost.

question

profit formula

answer

profit=total revenue-total cost

question

explicit cost

answer

A cost incurred when an actual (monetary) payment is made.

question

implicit cost

answer

A cost that represents the value of resources used in production for which no actual (monetary) payment is made.

question

accounting profit

answer

The difference between total revenue and explicit costs.

question

accounting profit formula

answer

Accounting profit=total revenue-total cost (explicit costs)

question

economic profit

answer

The difference between total revenue and total cost, including both explicit and implicit costs.

question

economic profit formula

answer

Economic profit=total revenue-total cost (explicit costs+implicit costs)

question

normal profit

answer

Zero economic profit, the level of profit necessary to keep resources employed in a firm. A firm that earns normal profit is earning revenue equal to its total costs (explicit plus implicit costs).

question

normal profit formula

answer

Normal profit=zero economic profit

question

fixed input

answer

An input whose quantity cannot be changed as output changes.

question

variable input

answer

An input whose quantity can be changed as output changes.

question

short run

answer

A period during which some inputs in the production process are fixed.

question

long run

answer

A period during which all inputs in the production process can be varied. (No inputs are fixed.)

question

fixed costs

answer

Costs that do not vary with output; the costs associated with fixed inputs.

question

variable costs

answer

Costs that vary with output; the costs associated with variable inputs.

question

total cost (TC)

answer

the sum of fixed costs and variable costs.

question

total cost formula

answer

TC=TFC+TVC (total cost, total fixed cost, total variable cost)

question

marginal cost (MC)

answer

The change in total cost that results from a change in quantity of output

question

marginal cost formula

answer

MC= ΔTC/ΔQ

question

average fixed cost (AFC)

answer

Total fixed cost divided by quantity of output: AFC=TFC/Q

question

average variable cost (AVC)

answer

Total variable cost divided by quantity of output: AFC=TVC/Q

question

average-marginal rule

answer

When the marginal magnitude is above the average magnitude, the average magnitude rises; when the marginal magnitude is below the average magnitude, the average magnitude falls.

question

sunk cost

answer

A cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered.

question

To an economist, the cost of the shoes is a sunk cost because it...

answer

1) was incurred in the past
2)cannot be changed by a current decision
3)cannot be recovered

question

long-run average total (LARATC) curve

answer

A curve that shows the lowest (unit) cost at which a firm can produce any given level of output.

question

economies of scale

answer

Economies that exist when inputs are increased by some percentage and output increases by a greater percentage, causing unit costs to fall.

question

constant returns to scale

answer

The condition when inputs are increased by some percentage and output increases by an equal percentage, causing unit costs to remain constant.

question

diseconomies of scale

answer

The condition when inputs are increased by some percentage and output increases by a smaller percentage, causing unit costs to rise.

question

minimum efficient scale

answer

The lowest output level at which average total costs are minimized.

1 of 41

question

business firm

answer

an entity that employs factors of production (resources) to produce goods and services to be sold to consumers, other firms, or the government.

question

market coordinator

answer

The process in which individuals perform tasks, such as producing certain quantities of goods, on the basis of changes in market forces, such as supply, demand, and price.

question

managerial coordination

answer

The process in which managers direct employees to perform certain tasks.

question

shirking

answer

The behavior of a worker who is putting forth less than the agreed-to effort.

question

monitor

answer

A person in a business firm who coordinates team production and reduces shirking.

question

residual claimant

answer

person who share in the profits of a business firm

question

In the theory of the firm, the exchanges take place at two levels:

answer

1)at the level of individuals coming together to form a team
2)at the level of workers choosing a monitor.

question

utility function

answer

subjective, not observable, no peak

question

production function

answer

objective, measurable, there is a peak

question

horizontal axis

answer

labor

question

line on graph

answer

capital

question

profit

answer

The difference between total revenue and total cost.

question

profit formula

answer

profit=total revenue-total cost

question

explicit cost

answer

A cost incurred when an actual (monetary) payment is made.

question

implicit cost

answer

A cost that represents the value of resources used in production for which no actual (monetary) payment is made.

question

accounting profit

answer

The difference between total revenue and explicit costs.

question

accounting profit formula

answer

Accounting profit=total revenue-total cost (explicit costs)

question

economic profit

answer

The difference between total revenue and total cost, including both explicit and implicit costs.

question

economic profit formula

answer

Economic profit=total revenue-total cost (explicit costs+implicit costs)

question

normal profit

answer

Zero economic profit, the level of profit necessary to keep resources employed in a firm. A firm that earns normal profit is earning revenue equal to its total costs (explicit plus implicit costs).

question

normal profit formula

answer

Normal profit=zero economic profit

question

fixed input

answer

An input whose quantity cannot be changed as output changes.

question

variable input

answer

An input whose quantity can be changed as output changes.

question

short run

answer

A period during which some inputs in the production process are fixed.

question

long run

answer

A period during which all inputs in the production process can be varied. (No inputs are fixed.)

question

fixed costs

answer

Costs that do not vary with output; the costs associated with fixed inputs.

question

variable costs

answer

Costs that vary with output; the costs associated with variable inputs.

question

total cost (TC)

answer

the sum of fixed costs and variable costs.

question

total cost formula

answer

TC=TFC+TVC (total cost, total fixed cost, total variable cost)

question

marginal cost (MC)

answer

The change in total cost that results from a change in quantity of output

question

marginal cost formula

answer

MC= ΔTC/ΔQ

question

average fixed cost (AFC)

answer

Total fixed cost divided by quantity of output: AFC=TFC/Q

question

average variable cost (AVC)

answer

Total variable cost divided by quantity of output: AFC=TVC/Q

question

average-marginal rule

answer

When the marginal magnitude is above the average magnitude, the average magnitude rises; when the marginal magnitude is below the average magnitude, the average magnitude falls.

question

sunk cost

answer

A cost incurred in the past that cannot be changed by current decisions and therefore cannot be recovered.

question

To an economist, the cost of the shoes is a sunk cost because it...

answer

1) was incurred in the past
2)cannot be changed by a current decision
3)cannot be recovered

question

long-run average total (LARATC) curve

answer

A curve that shows the lowest (unit) cost at which a firm can produce any given level of output.

question

economies of scale

answer

Economies that exist when inputs are increased by some percentage and output increases by a greater percentage, causing unit costs to fall.

question

constant returns to scale

answer

The condition when inputs are increased by some percentage and output increases by an equal percentage, causing unit costs to remain constant.

question

diseconomies of scale

answer

The condition when inputs are increased by some percentage and output increases by a smaller percentage, causing unit costs to rise.

question

minimum efficient scale

answer

The lowest output level at which average total costs are minimized.

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