ECON 202 Module 9 - Assignment Essays

question

What do the owners of firms want to do?

answer

maximize profits/profit maximization

question

Profit equals

answer

total revenue - total cost, that is, the sum of everything you earnedminus the sum of what it cost you.

question

production technology

answer

turns inputs into outputs

question

inputs have

answer

costs

question

outputs can be

answer

sold for revenue

question

Technology =

answer

the processes that the firm uses

question

firms face two kinds of costs

answer

Fixed costs, Variable costs

question

Fixed costs

answer

They don't change based on the firm's outputs. They remain constant as output increases.
Examples include machinery or the physical space of an office.

question

Variable costs

answer

those that do change as output changes, things like hiring more workers or buying more raw materials

question

short run

answer

firms can't change fixed costs or technology, though they can make adjustments to their variable inputs, like workers or raw materials- competitors cannot change

question

long run

answer

they can change their production technology or physical space. So everything is varied.

question

The short and long run aren't really

answer

measured in terms of time because they depend on the type of business.

question

explicit costs

answer

costs in which the firm spends money on buying things. This is the obvious stuff, wages for workers, a lease payment on a store, and so on.

question

explicit costs are also called

answer

accounting costs

question

why are explicit costs also called accounting costs

answer

because they're what show up on an accounting balance statement

question

implicit costs

answer

These are nonmonetary opportunity costs

question

If you could have earned $50,000 this year instead of running your business, then that $50,000 counts as part of your

answer

implicit costs

question

The would be explicit, the money you actually spend, plus implicit, the opportunity cost of your time and funds equals

answer

economic costs

question

accounting profit

answer

The total revenue a business receives, less its explicit financial costs; Accounting profit = Total revenue − Explicit financial costs.

question

economic profit

answer

The total revenue a firm receives, less both explicit financial costs and the entrepreneur's implicit opportunity costs; Economic profit = Total revenue − Explicit financial costs − Entrepreneur's implicit opportunity costs.

question

average revenue

answer

Revenue per unit, calculated as total revenue divided by the quantity supplied. Average revenue is equal to the price, if you charge everyone the same price.

question

average cost

answer

Cost per unit, calculated as your firm's total costs (including fixed and variable costs) divided by the quantity produced.

question

profit margin

answer

Profits per unit sold; Profit margin = Average revenue − Average cost.

question

Economic profit is

answer

typically lower than accounting profit.

question

Economic costs and accounting costs differ because accountants include

answer

only explicit costs.

question

Economic costs and accounting costs differ because economists include

answer

both explicit and implicit costs.

question

the average variable cost curve is always below the

answer

average total cost curve

question

in the long run, there are no fixed costs. all costs are

answer

variable

question

economies of scale

answer

when long-run average total cost declines/falls as output/quanity increases

question

Marginal Cost

answer

the cost of producing one more unit of a good

question

average variable cost

answer

variable cost divided by the quantity of output

question

Average Total Cost

answer

total cost divided by the quantity of output

question

When marginal cost is below the average total cost,

answer

average cost will fall

question

When marginal cost is above the average total cost,

answer

average cost will rise

question

Average cost equals:

answer

total cost divided by output.

question

Average fixed costs will

answer

fall as output rises.

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product. ex. agricultural products where no single consumer or producer makes up a large share of the crop, all of which are basically the same, and anyone can start up their own farm.

question

A perfectly competitive market has three conditions.

answer

First, it has many buyers and sellers, all of which are small. Second, they sell identical products, And third, there are no barriers to entry.

question

Firms in perfectly competitive market are

answer

price takers. They don't have any bargaining power, because they're not big enough to influence the market.

question

in perfect competition

answer

P = MR

question

total revenue

answer

Price x Quantity

question

profit

answer

total revenue minus total cost

question

optimal point

answer

price=mc or mr=mc

question

Price takers

answer

charge the prevailing prices and do not have any effect on the market price.

question

price is less than average variable cost

answer

firm should shut down right away

question

price= average variable cost

answer

firm is at shutdown point

question

price is greater than average variable cost

answer

stay in business in the short run

question

Profit =

answer

(price) × (quantity) − (average cost ) × (quantity)

question

economic profits lead to

answer

firm entry where supply curve shifts right

question

economic losses lead to

answer

firm exit where supply curve shifts left

question

if demand increases

answer

supply increases

question

in a perfect competition, marginal revenue is

answer

constant, like fixed cost

question

Total Revenue (TR)

answer

marginal revenue x quantity

question

Rational Rule for Entry:

answer

You should enter a market if you expect to earn a positive economic profit, which occurs when the price exceeds your average cost.

question

Rational Rule for Exit:

answer

Exit the market if you expect to earn a negative economic profit, which occurs if the price is less than your average costs.

question

free entry

answer

When there are no factors making it particularly difficult or costly for a business to enter or exit an industry.

question

efficient production

answer

producing a given quantity of output at the lowest possible cost, which requires producing each good at the lowest marginal cost

question

Efficient Allocation

answer

allocating goods to create the largest economic surplus, which requires that each good goes to the person who'll get the highest marginal benefit from it

1 of 58

question

What do the owners of firms want to do?

answer

maximize profits/profit maximization

question

Profit equals

answer

total revenue - total cost, that is, the sum of everything you earnedminus the sum of what it cost you.

question

production technology

answer

turns inputs into outputs

question

inputs have

answer

costs

question

outputs can be

answer

sold for revenue

question

Technology =

answer

the processes that the firm uses

question

firms face two kinds of costs

answer

Fixed costs, Variable costs

question

Fixed costs

answer

They don't change based on the firm's outputs. They remain constant as output increases.
Examples include machinery or the physical space of an office.

question

Variable costs

answer

those that do change as output changes, things like hiring more workers or buying more raw materials

question

short run

answer

firms can't change fixed costs or technology, though they can make adjustments to their variable inputs, like workers or raw materials- competitors cannot change

question

long run

answer

they can change their production technology or physical space. So everything is varied.

question

The short and long run aren't really

answer

measured in terms of time because they depend on the type of business.

question

explicit costs

answer

costs in which the firm spends money on buying things. This is the obvious stuff, wages for workers, a lease payment on a store, and so on.

question

explicit costs are also called

answer

accounting costs

question

why are explicit costs also called accounting costs

answer

because they're what show up on an accounting balance statement

question

implicit costs

answer

These are nonmonetary opportunity costs

question

If you could have earned $50,000 this year instead of running your business, then that $50,000 counts as part of your

answer

implicit costs

question

The would be explicit, the money you actually spend, plus implicit, the opportunity cost of your time and funds equals

answer

economic costs

question

accounting profit

answer

The total revenue a business receives, less its explicit financial costs; Accounting profit = Total revenue − Explicit financial costs.

question

economic profit

answer

question

average revenue

answer

Revenue per unit, calculated as total revenue divided by the quantity supplied. Average revenue is equal to the price, if you charge everyone the same price.

question

average cost

answer

Cost per unit, calculated as your firm's total costs (including fixed and variable costs) divided by the quantity produced.

question

profit margin

answer

Profits per unit sold; Profit margin = Average revenue − Average cost.

question

Economic profit is

answer

typically lower than accounting profit.

question

Economic costs and accounting costs differ because accountants include

answer

only explicit costs.

question

Economic costs and accounting costs differ because economists include

answer

both explicit and implicit costs.

question

the average variable cost curve is always below the

answer

average total cost curve

question

in the long run, there are no fixed costs. all costs are

answer

variable

question

economies of scale

answer

when long-run average total cost declines/falls as output/quanity increases

question

Marginal Cost

answer

the cost of producing one more unit of a good

question

average variable cost

answer

variable cost divided by the quantity of output

question

Average Total Cost

answer

total cost divided by the quantity of output

question

When marginal cost is below the average total cost,

answer

average cost will fall

question

When marginal cost is above the average total cost,

answer

average cost will rise

question

Average cost equals:

answer

total cost divided by output.

question

Average fixed costs will

answer

fall as output rises.

question

perfect competition

answer

question

A perfectly competitive market has three conditions.

answer

First, it has many buyers and sellers, all of which are small. Second, they sell identical products, And third, there are no barriers to entry.

question

Firms in perfectly competitive market are

answer

price takers. They don't have any bargaining power, because they're not big enough to influence the market.

question

in perfect competition

answer

P = MR

question

total revenue

answer

Price x Quantity

question

profit

answer

total revenue minus total cost

question

optimal point

answer

price=mc or mr=mc

question

Price takers

answer

charge the prevailing prices and do not have any effect on the market price.

question

price is less than average variable cost

answer

firm should shut down right away

question

price= average variable cost

answer

firm is at shutdown point

question

price is greater than average variable cost

answer

stay in business in the short run

question

Profit =

answer

(price) × (quantity) − (average cost ) × (quantity)

question

economic profits lead to

answer

firm entry where supply curve shifts right

question

economic losses lead to

answer

firm exit where supply curve shifts left

question

if demand increases

answer

supply increases

question

in a perfect competition, marginal revenue is

answer

constant, like fixed cost

question

Total Revenue (TR)

answer

marginal revenue x quantity

question

Rational Rule for Entry:

answer

You should enter a market if you expect to earn a positive economic profit, which occurs when the price exceeds your average cost.

question

Rational Rule for Exit:

answer

Exit the market if you expect to earn a negative economic profit, which occurs if the price is less than your average costs.

question

free entry

answer

When there are no factors making it particularly difficult or costly for a business to enter or exit an industry.

question

efficient production

answer

producing a given quantity of output at the lowest possible cost, which requires producing each good at the lowest marginal cost

question

Efficient Allocation

answer

allocating goods to create the largest economic surplus, which requires that each good goes to the person who'll get the highest marginal benefit from it

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