Econ 201 Final Exam SDSU - Assignment Essays

question

Economic cost (9)

answer

the payment that must be made to obtain and retain the services of a resource (must attract resources from alternate use)

question

Explicit Cost (9)

answer

monetary payments to purchase resources (ex. cash transactions)
* this is also an opportunity cost

question

Implicit costs (9)

answer

opportunity cost of using the resources a company already owns instead of selling them for cash

question

Accounting Profit (9)

answer

the profit number that accountants calculate by subtracting total explicit costs from total sales revenue
Acct profit= revenue - explicit costs

question

Economic profit (9)

answer

accounts for both explicit and implicit costs
Econ profit= revenue -explicit -implicit

question

Short run (9)

answer

period too brief for change in plant capacity but enough for minor changes

question

Long run (9)

answer

period long enough to adjust quantity of all resources including plant capacity

question

SR total product (9)

answer

total output of good or service

question

SR marginal product (9)

answer

extra output or added product associated with adding more units of variable resource
Calculation: MP= change in TP/change in labor input

question

SR average product (9)

answer

AP= total product/units of labor (also labor productivity calculation)

question

law of diminishing returns (9)

answer

assumes that technology is fixed and thus the techniques of production do not change as more units of a variable resource are added to a fixed resource, each unity of variable will decline

question

Marginal product- Total product +/+ (9)

answer

when total product is increasing at an increasing rate, marginal product RISES

question

Marginal product- Total product +/- (9)

answer

when total product is increasing at a decreasing rate, marginal product is positive but falling

question

Marginal product- Total Product MAX (9)

answer

when total product is at maximum, the marginal product is ZERO

question

Marginal product- Total product - (9)

answer

when total product declines, marginal product becomes NEGATIVE

question

Marginal product- less than AVG product (9)

answer

Average product declines when marginal product is less than average product

question

SR Production Costs (9)

answer

fixed costs- don't change even if zero output (rent, etc.)
variable costs- change with level out output (materials, fuel, power, labor, etc.)

question

Avg fixed cost (9)

answer

total fixed cost/amt of output
(declines as output increases)

question

Avg variable cost (9)

answer

total variable cost/amount of output
(declines initially- reaches minimum- increases)
Both ATC and TVC reflect law of diminishing returns
U-shaped graph

question

Marginal Decisions (9)

answer

Can control marginal costs directly and immediately

question

MC curve (9)

answer

- a reflection of the marginal product curve
- marginal product increases; marginal cost decreases
- marginal product decreases; marginal cost increases
- intersects ATC curve at ATC's min. point

question

ATC (9)

answer

when MC plus TC are less than ATC then ATC is falling and opposite

question

Chang in variable inputs (9)

answer

AVC, ATC, MC- rise & curves increase
AFC remains the same

question

LR Production Costs (9)

answer

can take all desired resource adjustments

question

LR ATC curve (9)

answer

lowest ATC at any output level after changes

question

LR Planning curve (9)

answer

blue bumpy line

question

LR U shaped curve (9)

answer

NOT from rising resources & Law of DR
1) resource prices constant
2) law of diminishing returns does not apply to long run

question

Economies of scale (9)

answer

- downsloping long run ATC curve (decreases ATC)
- labor specialization, managerial specialization, efficient capital

question

Diseconomies of Scale (9)

answer

caused by difficulty controlling and coordinating operations (increases ATC)

question

Constant Returns to Scale (9)

answer

long run ATC does not change

question

Minimum Efficient Scale (9)

answer

lowest level output while minimizing long run ATC

question

Natural Monopoly (9)

answer

ATC minimized when one firm produces it

question

Four market models (10)

answer

pure, perfect competition
pure monopoly
monopolistic competition
oligopoly

question

Pure/Perfect Competition (10)

answer

large number producing standardized product
easy entry
price take-must accept market price, no control
(relatively rare)

question

Pure Monopoly (10)

answer

one firm is sole seller
additional firms blocked
full control of price

question

Monopolistic Competition (10)

answer

large number producing different products
non price competition
fairly easy entry/exit

question

Oligopoly (10)

answer

- a few sellers of a standard or different product
- affected by rival decisions in determining price and output

question

Pure competition demand schedule (10)

answer

perfectly elastic at market price for each individual firm

question

Pure competition market demand (10)

answer

NOT perfectly elastic in competitive market

question

Price for Pur.Comp. (10)

answer

price = avg. revenue
MR=Price

question

TR total revenue (10)

answer

TR= price x qty for sale
straight line that slopes up and right

question

MR marginal revenue (10)

answer

change in total revenue from selling one more unit of output

question

Pur. Comp. Demand Curve (10)

answer

horizontal perfect price elasticity

question

Pur. Comp. MR curve (10)

answer

coincides with demand because price is constant

question

Profit Max in Short Run (10)

answer

-Purely competitive price taker cannot maximize off of price changes, only can change resources used

question

TR-TC Approach (10)

answer

compare total revenue and total cost to determine max profit or min loss
TR & TC are equal where the two curves intersect (break-even point, normal profit)

question

MR-MC Approach (10)

answer

compare marginal revenue and marginal cost to determine max profit or min loss by comparing each additional unit of product
- should produce any additional unity of output whose MR > MC

question

3 Questions for Market Price of Product (10)

answer

1- should we produce it?
2- if so, how much?
3- what economic profit or loss will we realize?

question

Output determining rule (10) (restated as P=MC in pure comp firms)

answer

as long as producing positive amount of output is preferrable to shutting down and producing nothing, the firm will maximize profit or minimize loss in short run by producing the qty output where MR = MC
*only if better to produce then not

question

Economic Profit (10)

answer

TC- TR or Profit= (P-ATC) x Q

question

MC + Short Run Supply (10)

answer

quantity supplied increases as price increases (economic profit is higher at higher prices

question

Short-Run Supply Curve (10)

answer

The portion of the marginal cost curve lying above its AVC curve is the short-run supply curve

question

Equilibrium price (10)

answer

given and unalterable to the individual firm
(Collective supply is price maker)

question

Pure Competition LONG RUN (11)

answer

after all adjustments are completed, the price is equal to and production will occur at the firm's minimum ATC

question

Entry/Exit Industry Changes (11)

answer

entry- increase supply; decrease price
exit- decrease supply; increase price
* always brings price back to min ATC bc perfectly elastic

question

constant-cost industry (11)

answer

industry expansion or contraction doesn't affect resource prices or production costs
* long run supply curve is horizontal

question

increasing cost industries (11)

answer

most are like this
ATC curve shifts up as expansion and down as shrinks

question

Long Run supply curve (11)

answer

supply curve slopes up

question

Decreasing Cost Industries

answer

(PC's industry example)
firms have lower cost as their industry expands

question

Productive Efficiency

answer

P= Min ATC
requires goods to be produced in the least costly way

question

allocative efficiency

answer

the particular mix of goods and services most highly valued by society

question

pure monopoly (12)

answer

an industry with a single firm that produces a product for which there are no close substitutes
- single seller
- no close substitutes
- blocked entry
- nonprice competition
- price maker

question

Barriers to entry (12)

answer

economies of scale
patents and licenses
ownership of essential resources
pricing and strategic barriers

question

Monopoly demand (12)

answer

downsloping demand curve, NOT perfectly elastic
- assumptions: barriers to entry, no gov't regulation, same price for all output units
*no supply curve

question

Natural monopoly (12)

answer

market demand curve intersects the long run ATC curve at any point where ATCs are declining

question

MR < Price (12)

answer

ALWAYS for every unit of output except the first
* A monopolist will NEVER choose a price qty combo where price decreases causing the total revenue to decrease, will produce at MR=MC

question

Profit (12)

answer

pure monopolist seeks max total profit not max unit profit

question

Profit Selections (12)

answer

Pure competitor- only normal profit
Pure monopoly- economic profit

1 of 68

question

Economic cost (9)

answer

the payment that must be made to obtain and retain the services of a resource (must attract resources from alternate use)

question

Explicit Cost (9)

answer

monetary payments to purchase resources (ex. cash transactions)
* this is also an opportunity cost

question

Implicit costs (9)

answer

opportunity cost of using the resources a company already owns instead of selling them for cash

question

Accounting Profit (9)

answer

the profit number that accountants calculate by subtracting total explicit costs from total sales revenue
Acct profit= revenue - explicit costs

question

Economic profit (9)

answer

accounts for both explicit and implicit costs
Econ profit= revenue -explicit -implicit

question

Short run (9)

answer

period too brief for change in plant capacity but enough for minor changes

question

Long run (9)

answer

period long enough to adjust quantity of all resources including plant capacity

question

SR total product (9)

answer

total output of good or service

question

SR marginal product (9)

answer

extra output or added product associated with adding more units of variable resource
Calculation: MP= change in TP/change in labor input

question

SR average product (9)

answer

AP= total product/units of labor (also labor productivity calculation)

question

law of diminishing returns (9)

answer

assumes that technology is fixed and thus the techniques of production do not change as more units of a variable resource are added to a fixed resource, each unity of variable will decline

question

Marginal product- Total product +/+ (9)

answer

when total product is increasing at an increasing rate, marginal product RISES

question

Marginal product- Total product +/- (9)

answer

when total product is increasing at a decreasing rate, marginal product is positive but falling

question

Marginal product- Total Product MAX (9)

answer

when total product is at maximum, the marginal product is ZERO

question

Marginal product- Total product - (9)

answer

when total product declines, marginal product becomes NEGATIVE

question

Marginal product- less than AVG product (9)

answer

Average product declines when marginal product is less than average product

question

SR Production Costs (9)

answer

fixed costs- don't change even if zero output (rent, etc.)
variable costs- change with level out output (materials, fuel, power, labor, etc.)

question

Avg fixed cost (9)

answer

total fixed cost/amt of output
(declines as output increases)

question

Avg variable cost (9)

answer

total variable cost/amount of output
(declines initially- reaches minimum- increases)
Both ATC and TVC reflect law of diminishing returns
U-shaped graph

question

Marginal Decisions (9)

answer

Can control marginal costs directly and immediately

question

MC curve (9)

answer

- a reflection of the marginal product curve
- marginal product increases; marginal cost decreases
- marginal product decreases; marginal cost increases
- intersects ATC curve at ATC's min. point

question

ATC (9)

answer

when MC plus TC are less than ATC then ATC is falling and opposite

question

Chang in variable inputs (9)

answer

AVC, ATC, MC- rise & curves increase
AFC remains the same

question

LR Production Costs (9)

answer

can take all desired resource adjustments

question

LR ATC curve (9)

answer

lowest ATC at any output level after changes

question

LR Planning curve (9)

answer

blue bumpy line

question

LR U shaped curve (9)

answer

NOT from rising resources & Law of DR
1) resource prices constant
2) law of diminishing returns does not apply to long run

question

Economies of scale (9)

answer

- downsloping long run ATC curve (decreases ATC)
- labor specialization, managerial specialization, efficient capital

question

Diseconomies of Scale (9)

answer

caused by difficulty controlling and coordinating operations (increases ATC)

question

Constant Returns to Scale (9)

answer

long run ATC does not change

question

Minimum Efficient Scale (9)

answer

lowest level output while minimizing long run ATC

question

Natural Monopoly (9)

answer

ATC minimized when one firm produces it

question

Four market models (10)

answer

pure, perfect competition
pure monopoly
monopolistic competition
oligopoly

question

Pure/Perfect Competition (10)

answer

large number producing standardized product
easy entry
price take-must accept market price, no control
(relatively rare)

question

Pure Monopoly (10)

answer

one firm is sole seller
additional firms blocked
full control of price

question

Monopolistic Competition (10)

answer

large number producing different products
non price competition
fairly easy entry/exit

question

Oligopoly (10)

answer

- a few sellers of a standard or different product
- affected by rival decisions in determining price and output

question

Pure competition demand schedule (10)

answer

perfectly elastic at market price for each individual firm

question

Pure competition market demand (10)

answer

NOT perfectly elastic in competitive market

question

Price for Pur.Comp. (10)

answer

price = avg. revenue
MR=Price

question

TR total revenue (10)

answer

TR= price x qty for sale
straight line that slopes up and right

question

MR marginal revenue (10)

answer

change in total revenue from selling one more unit of output

question

Pur. Comp. Demand Curve (10)

answer

horizontal perfect price elasticity

question

Pur. Comp. MR curve (10)

answer

coincides with demand because price is constant

question

Profit Max in Short Run (10)

answer

-Purely competitive price taker cannot maximize off of price changes, only can change resources used

question

TR-TC Approach (10)

answer

compare total revenue and total cost to determine max profit or min loss
TR & TC are equal where the two curves intersect (break-even point, normal profit)

question

MR-MC Approach (10)

answer

compare marginal revenue and marginal cost to determine max profit or min loss by comparing each additional unit of product
- should produce any additional unity of output whose MR > MC

question

3 Questions for Market Price of Product (10)

answer

1- should we produce it?
2- if so, how much?
3- what economic profit or loss will we realize?

question

Output determining rule (10) (restated as P=MC in pure comp firms)

answer

question

Economic Profit (10)

answer

TC- TR or Profit= (P-ATC) x Q

question

MC + Short Run Supply (10)

answer

quantity supplied increases as price increases (economic profit is higher at higher prices

question

Short-Run Supply Curve (10)

answer

The portion of the marginal cost curve lying above its AVC curve is the short-run supply curve

question

Equilibrium price (10)

answer

given and unalterable to the individual firm
(Collective supply is price maker)

question

Pure Competition LONG RUN (11)

answer

after all adjustments are completed, the price is equal to and production will occur at the firm's minimum ATC

question

Entry/Exit Industry Changes (11)

answer

entry- increase supply; decrease price
exit- decrease supply; increase price
* always brings price back to min ATC bc perfectly elastic

question

constant-cost industry (11)

answer

industry expansion or contraction doesn't affect resource prices or production costs
* long run supply curve is horizontal

question

increasing cost industries (11)

answer

most are like this
ATC curve shifts up as expansion and down as shrinks

question

Long Run supply curve (11)

answer

supply curve slopes up

question

Decreasing Cost Industries

answer

(PC's industry example)
firms have lower cost as their industry expands

question

Productive Efficiency

answer

P= Min ATC
requires goods to be produced in the least costly way

question

allocative efficiency

answer

the particular mix of goods and services most highly valued by society

question

pure monopoly (12)

answer

an industry with a single firm that produces a product for which there are no close substitutes
- single seller
- no close substitutes
- blocked entry
- nonprice competition
- price maker

question

Barriers to entry (12)

answer

economies of scale
patents and licenses
ownership of essential resources
pricing and strategic barriers

question

Monopoly demand (12)

answer

downsloping demand curve, NOT perfectly elastic
- assumptions: barriers to entry, no gov't regulation, same price for all output units
*no supply curve

question

Natural monopoly (12)

answer

market demand curve intersects the long run ATC curve at any point where ATCs are declining

question

MR < Price (12)

answer

ALWAYS for every unit of output except the first
* A monopolist will NEVER choose a price qty combo where price decreases causing the total revenue to decrease, will produce at MR=MC

question

Profit (12)

answer

pure monopolist seeks max total profit not max unit profit

question

Profit Selections (12)

answer

Pure competitor- only normal profit
Pure monopoly- economic profit

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