ECO 201 Dr. Elliott Exam 3 - Assignment Essays

question

Profit

answer

Regardless of market type, firms are all about

question

Profit

answer

Revenue-Costs

question

Revenue

answer

-Amount of money the firm brings in
-Price times quantity sold

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Cost

answer

Amount the firm pays to produce the good

question

Maximizing profits

answer

Firms are all about

question

Accounting Cost

answer

-Visible costs
-Costs of land, labor, and capital

question

Economic Cost

answer

-Visible costs
-Opportunity cost of capital and time

question

Economic costs

answer

Accounting costs are smaller than

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Economic profit

answer

Accounting profit is greater than

question

Positive accounting profit

answer

If a firm is making 0 economic profit, it is making

question

Short run

answer

Not a specific period of time

question

Short run

answer

The time period in which at least one input is fixed (usually capital) and all others (usually just labor) are variable

question

Total Cost

answer

Fixed cost + Variable cost

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Average Total Cost

answer

Average fixed cost + Average variable cost

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Marginal cost

answer

The change in cost given a change in output

question

The average falls

answer

When the marginal is less than the average,

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The average rises

answer

When the marginal is greater than the average,

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The average does not change

answer

When the marginal and the average are equal,

question

Long Run

answer

The time period in which all inputs are variable

question

Long run

answer

-Can change the amounts of labor and capital
-No fixed costs, all costs are variable

question

Perfect Competition Assumptions

answer

1. Many buyers
2. Many sellers
3. Product homogeneity
4. Free entry and exit (perfect resource mobility)
5. Perfect information

question

Price

answer

The only thing that matters to consumers is

question

Lowest price seller

answer

Buyers go to the

question

Price takers

answer

Firms are

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Market price

answer

Firms can only sell at the

question

Perfectly elastic

answer

For a firm in perfect competition, demand is

question

Producing an additional unit

answer

If we produce less than Q*, we can make more money by

question

When it is sold

answer

If we produce more than Q*, it costs the firm more to produce than the firm gets

question

Marginal Cost=Marginal Revenue

answer

Regardless of market type, profits are maximized where

question

Market

answer

Marginal revenue is determined by the

question

Marginal revenue

answer

In perfect competition, the firm's demand curve is elastic and equal to

question

Fixed costs

answer

If the firm shuts down, it must still pay

question

All of their variable costs and at least some of their fixed costs

answer

In the short run, firms will choose to operate even with negative profits if they are able to cover

question

All of its variable costs

answer

In the short run, firms will choose to shut down if it is not able to cover

question

Point A

answer

Intersection of MC and MR and shows profit maximizing output, Q*

question

Point B

answer

ATC for profit maximizing output, Q*

question

Point C

answer

AVC for profit maximizing output, Q*

question

Above

answer

Point B will always be _____ Point C

question

Positive economic profits

answer

If Point A is above Point B, the firm is making

question

Negative economic profit

answer

If Point A is below Point B, the firm is making

question

Shut down

answer

The firm will ____ ____ if Point A is below Point C

question

Marginal Revenue

answer

Demand

question

Marginal Cost

answer

Supply

question

Supply

answer

The total amount each firm would be willing to bring at a given price

question

Supply

answer

The sum of all firms' marginal costs curves

question

Perfect Competition in the Long Run

answer

-All inputs are variable
-No fixed costs
-Free entry and exit (perfect resource mobility)

question

Entry

answer

Extranormal profit induces

question

Supply

answer

Entry pushes out

question

Profits are gone

answer

Firms enter until all

question

Exit

answer

Losses induce

question

Supply

answer

Exit pushes in

question

Losses are gone

answer

Firms exit until all

question

0 economic profits

answer

Market forces are pushing the industry to

question

Minimum cost point

answer

Firms operate at the

question

Long Run Equilibrium

answer

-Demand increases
-Price increases
-Profits increase
-Entry
-Supply increases
-Price falls
-Exit until original price with increased output

question

Monopoly

answer

Only one seller of the good

question

Monopolies

answer

Come from
-Control of Vital Inputs
-Patents and Copyrights
-Government Licenses and Franchise

question

Natural Monopoly

answer

An industry where it makes economic sense to have only one provider of a good

question

Economies of Scale

answer

Increasing Returns to Scale
-If we double inputs, we more than double outputs
-If we double outputs, we less than double costs
-Average costs fall

question

Diseconomies of Scale

answer

Decreasing Returns to Scale
-If we double inputs, we less than double outputs
-If we double outputs, we more than double costs
-Average costs rise

question

Constant Economies of Scale

answer

Constant Returns to Scale
-If we double inputs, we exactly double outputs
-If we double outputs, we exactly double costs
-Average costs stay the same

question

Natural monopoly

answer

Usually have high fixed costs
-Pipeline
-Cable in a city
-Wires across the ocean
-Pipelines across a country
-Large scale generation capacity

question

Natural monopolies

answer

As technology changes, there are fewer

1 of 63

question

Profit

answer

Regardless of market type, firms are all about

question

Profit

answer

Revenue-Costs

question

Revenue

answer

-Amount of money the firm brings in
-Price times quantity sold

question

Cost

answer

Amount the firm pays to produce the good

question

Maximizing profits

answer

Firms are all about

question

Accounting Cost

answer

-Visible costs
-Costs of land, labor, and capital

question

Economic Cost

answer

-Visible costs
-Opportunity cost of capital and time

question

Economic costs

answer

Accounting costs are smaller than

question

Economic profit

answer

Accounting profit is greater than

question

Positive accounting profit

answer

If a firm is making 0 economic profit, it is making

question

Short run

answer

Not a specific period of time

question

Short run

answer

The time period in which at least one input is fixed (usually capital) and all others (usually just labor) are variable

question

Total Cost

answer

Fixed cost + Variable cost

question

Average Total Cost

answer

Average fixed cost + Average variable cost

question

Marginal cost

answer

The change in cost given a change in output

question

The average falls

answer

When the marginal is less than the average,

question

The average rises

answer

When the marginal is greater than the average,

question

The average does not change

answer

When the marginal and the average are equal,

question

Long Run

answer

The time period in which all inputs are variable

question

Long run

answer

-Can change the amounts of labor and capital
-No fixed costs, all costs are variable

question

Perfect Competition Assumptions

answer

1. Many buyers
2. Many sellers
3. Product homogeneity
4. Free entry and exit (perfect resource mobility)
5. Perfect information

question

Price

answer

The only thing that matters to consumers is

question

Lowest price seller

answer

Buyers go to the

question

Price takers

answer

Firms are

question

Market price

answer

Firms can only sell at the

question

Perfectly elastic

answer

For a firm in perfect competition, demand is

question

Producing an additional unit

answer

If we produce less than Q*, we can make more money by

question

When it is sold

answer

If we produce more than Q*, it costs the firm more to produce than the firm gets

question

Marginal Cost=Marginal Revenue

answer

Regardless of market type, profits are maximized where

question

Market

answer

Marginal revenue is determined by the

question

Marginal revenue

answer

In perfect competition, the firm's demand curve is elastic and equal to

question

Fixed costs

answer

If the firm shuts down, it must still pay

question

All of their variable costs and at least some of their fixed costs

answer

In the short run, firms will choose to operate even with negative profits if they are able to cover

question

All of its variable costs

answer

In the short run, firms will choose to shut down if it is not able to cover

question

Point A

answer

Intersection of MC and MR and shows profit maximizing output, Q*

question

Point B

answer

ATC for profit maximizing output, Q*

question

Point C

answer

AVC for profit maximizing output, Q*

question

Above

answer

Point B will always be _____ Point C

question

Positive economic profits

answer

If Point A is above Point B, the firm is making

question

Negative economic profit

answer

If Point A is below Point B, the firm is making

question

Shut down

answer

The firm will ____ ____ if Point A is below Point C

question

Marginal Revenue

answer

Demand

question

Marginal Cost

answer

Supply

question

Supply

answer

The total amount each firm would be willing to bring at a given price

question

Supply

answer

The sum of all firms' marginal costs curves

question

Perfect Competition in the Long Run

answer

-All inputs are variable
-No fixed costs
-Free entry and exit (perfect resource mobility)

question

Entry

answer

Extranormal profit induces

question

Supply

answer

Entry pushes out

question

Profits are gone

answer

Firms enter until all

question

Exit

answer

Losses induce

question

Supply

answer

Exit pushes in

question

Losses are gone

answer

Firms exit until all

question

0 economic profits

answer

Market forces are pushing the industry to

question

Minimum cost point

answer

Firms operate at the

question

Long Run Equilibrium

answer

-Demand increases
-Price increases
-Profits increase
-Entry
-Supply increases
-Price falls
-Exit until original price with increased output

question

Monopoly

answer

Only one seller of the good

question

Monopolies

answer

Come from
-Control of Vital Inputs
-Patents and Copyrights
-Government Licenses and Franchise

question

Natural Monopoly

answer

An industry where it makes economic sense to have only one provider of a good

question

Economies of Scale

answer

Increasing Returns to Scale
-If we double inputs, we more than double outputs
-If we double outputs, we less than double costs
-Average costs fall

question

Diseconomies of Scale

answer

Decreasing Returns to Scale
-If we double inputs, we less than double outputs
-If we double outputs, we more than double costs
-Average costs rise

question

Constant Economies of Scale

answer

Constant Returns to Scale
-If we double inputs, we exactly double outputs
-If we double outputs, we exactly double costs
-Average costs stay the same

question

Natural monopoly

answer

Usually have high fixed costs
-Pipeline
-Cable in a city
-Wires across the ocean
-Pipelines across a country
-Large scale generation capacity

question

Natural monopolies

answer

As technology changes, there are fewer

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