ECON 251 Chapter 10

0 min read

Posted on

May 24th, 2023

question

two different measures of profit

answer

accounting and economic

question

accounting profit

answer

difference between revenues and explicit costs

question

accounting profit focuses on...

answer

whether a firm will be able to pay off their expenses

question

if a firm has positive accounting profit this means...

answer

the firm is earning enough to pay bills

question

economic profit

answer

difference between revenues and economic costs

question

economic profit identifies...

answer

whether a firm is earning more or less than it could earn if the firm's resources were used elsewhere

question

positive economic profit

answer

industry offers the best return for use of their resources, incentive to stay in this industry

question

negative economic profit

answer

the resouces being used in an industry would have higher return for use of their resources, incentive to leave the industry

question

zero economic profit

answer

firm's resources are earning revenues equal to opportunity costs (normal profit), no incentive to leave or stay in the industry

question

normal profit

answer

economic profit equal to zero where resources are earning the value they would earn in their best alternative

question

anytime economic profit is positive then revenues are...

answer

large enough to pay off economic costs and leave surplus

question

short run

answer

a time frame where at least one resource cannot be adjusted

question

long run

answer

a time frame where all resources can be adjusted

question

marginal product of labor (MPL)

answer

additional output produced by one more unit of labor

question

marginal product of labor =

answer

change in quantity of production / change in labor

question

what does it mean when MPL is negative when increasing labor?

answer

quantity of other resources cannot be adjusted so labor becomes less and less productive

question

law of diminishing returns

answer

marginal product eventually falls as use of resource increases (will never come back up)

question

average product of labor

answer

output per worker

question

average product of labor =

answer

quantity / labor

question

slope of total product curve

answer

marginal product

question

when marginal product is above average product

answer

average product will always rise

ex. if you have a 3.0 GPA and get an A your GPA will rise

question

when marginal product is below average product

answer

average product will always fall

ex. if you have a 3.0 GPA and get a D your GPA will fall

question

when marginal product equals average product

answer

average product is at its maximum

question

in short run, two types of costs arise which are

answer

fixed costs, variable costs

question

fixed costs

answer

costs that do not change with level of output produced

question

variable costs

answer

costs that do change with level of output produced

question

total costs

answer

the sum of fixed and variable costs of producing output

question

average fixed cost

answer

fixed cost per unit of output produced

question

AFC =

answer

FC/Q

question

average variable cost

answer

variable cost per unit of output produced

question

AVC =

answer

VC/Q

question

average total cost

answer

total cost per unit of output produced

question

ATC =

answer

TC/Q

AFC + AVC

question

marginal cost

answer

the change in total cost from a given change in quantity

question

MC =

answer

change in TC / change in Q

question

in long run costs all inputs are ________ and there are no ____________.

answer

variable; fixed costs

question

long-run average cost

answer

average cost in long run when all inputs are variable

question

in the long run, the average cost of production tends to have a ________ shape

answer

question

economies of scale

answer

long run average cost falls as output increases

LRAC has negative slope

increases in production allow for changes that reduce costs on average

question

diseconomies of scale

answer

long run average cost rises as output increases

LRAC has positive slope

increases in production occur at such a large scale that continued increase in output have become so difficult to manage that costs rise on average

question

constant returns to scale

answer

long run average cost doesn't change as output increases

minimum of LRAC curve where slope = 0

1 of 41

question

two different measures of profit

answer

accounting and economic

question

accounting profit

answer

difference between revenues and explicit costs

question

accounting profit focuses on...

answer

whether a firm will be able to pay off their expenses

question

if a firm has positive accounting profit this means...

answer

the firm is earning enough to pay bills

question

economic profit

answer

difference between revenues and economic costs

question

economic profit identifies...

answer

whether a firm is earning more or less than it could earn if the firm's resources were used elsewhere

question

positive economic profit

answer

industry offers the best return for use of their resources, incentive to stay in this industry

question

negative economic profit

answer

the resouces being used in an industry would have higher return for use of their resources, incentive to leave the industry

question

zero economic profit

answer

firm's resources are earning revenues equal to opportunity costs (normal profit), no incentive to leave or stay in the industry

question

normal profit

answer

economic profit equal to zero where resources are earning the value they would earn in their best alternative

question

anytime economic profit is positive then revenues are...

answer

large enough to pay off economic costs and leave surplus

question

short run

answer

a time frame where at least one resource cannot be adjusted

question

long run

answer

a time frame where all resources can be adjusted

question

marginal product of labor (MPL)

answer

additional output produced by one more unit of labor

question

marginal product of labor =

answer

change in quantity of production / change in labor

question

what does it mean when MPL is negative when increasing labor?

answer

quantity of other resources cannot be adjusted so labor becomes less and less productive

question

law of diminishing returns

answer

marginal product eventually falls as use of resource increases (will never come back up)

question

average product of labor

answer

output per worker

question

average product of labor =

answer

quantity / labor

question

slope of total product curve

answer

marginal product

question

when marginal product is above average product

answer

average product will always rise

ex. if you have a 3.0 GPA and get an A your GPA will rise

question

when marginal product is below average product

answer

average product will always fall

ex. if you have a 3.0 GPA and get a D your GPA will fall

question

when marginal product equals average product

answer

average product is at its maximum

question

in short run, two types of costs arise which are

answer

fixed costs, variable costs

question

fixed costs

answer

costs that do not change with level of output produced

question

variable costs

answer

costs that do change with level of output produced

question

total costs

answer

the sum of fixed and variable costs of producing output

question

average fixed cost

answer

fixed cost per unit of output produced

question

AFC =

answer

FC/Q

question

average variable cost

answer

variable cost per unit of output produced

question

AVC =

answer

VC/Q

question

average total cost

answer

total cost per unit of output produced

question

ATC =

answer

TC/Q

AFC + AVC

question

marginal cost

answer

the change in total cost from a given change in quantity

question

MC =

answer

change in TC / change in Q

question

in long run costs all inputs are ________ and there are no ____________.

answer

variable; fixed costs

question

long-run average cost

answer

average cost in long run when all inputs are variable

question

in the long run, the average cost of production tends to have a ________ shape

answer

question

economies of scale

answer

long run average cost falls as output increases

LRAC has negative slope

increases in production allow for changes that reduce costs on average

question

diseconomies of scale

answer

long run average cost rises as output increases

LRAC has positive slope

increases in production occur at such a large scale that continued increase in output have become so difficult to manage that costs rise on average

question

constant returns to scale

answer

long run average cost doesn't change as output increases

minimum of LRAC curve where slope = 0

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