Econ 308 test 3 - Assignment Essays

question

Altruism:

answer

unselfish regard for the welfare of others

question

Present-aim standard:

answer

a person is rational if she is efficient in the pursuit of whatever aims she happens to hold at the moment of action.

question

self-interest standard:

answer

a person is rational if her motives are congruent with her narrow material interests

question

simple preference:

answer

one that is useful to an individual independent of tastes of other people. (example: taste for food)

question

strategic preference:

answer

one whose usefulness depends on how many others share the taste (example taste for aggressive behavior) (hawks perfer, doves avoid)

question

rational choice model:

answer

regards the consumers tastes as given

question

ecological models:

answer

ask where those tastes come from

question

commitment problems:

answer

games where the common feature is that people can do better if they can commit themselves to behave in a way that will later be inconsistent with their own material interests

question

commitment device:

answer

a device that commits a person to behave in a certain way in the future, even though he may wish to behave otherwise when the time comes

question

production function:

answer

the relationship that describes how inputs like capital and labor are transformed into output.

question

long run:

answer

the shortest period of time required to alter the amounts of all inputs used in a production process.

question

short run:

answer

the longest period of time during which at least one of the inputs used in a production process cannot be varied

question

variable input:

answer

an input that can be varied in the short run.

question

Fixed input:

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

properties of short term prodctuon:

answer

-it passes through the origin
-initially, the addition of variable inputs augments output at an increasing rate
-beyond some point, additional units of the variable input vie rise to smaller and smaller increments in output

question

law of diminishing return:

answer

if other inputs are fixed, the increase in outputs from an increase in the variable input must eventually decline

question

total product curve:

answer

a curve showing the amount of output as a function of the amount of variable input

question

marginal product:

answer

change in total product due to a 1-unit change in the variable input
MP= DeltaQ/DeltaL

question

average product:

answer

total output divided by the quantity of the variable input
AP=Q/L

question

Isoquant:

answer

the set of all input combinations that yield a given level of output
- similar to indifference curve

question

marginal rate of technical substitution (MRTS):

answer

the rate at which one input can be exchanged for another without altering the total level of output
MRTS= Delta K/ Delta L

question

answer

capital

question

answer

Labor

question

perfect substitutes:

answer

two goods with straight-line indifference curves

question

perfect complements

answer

two goods with right-angle indifference curves

question

Why are some industries comprised of many small firms and others few large firms?

answer

relationship between efficiency and size

question

increasing returns to scale:

answer

the property of a production function whereby a proportional increase in every inputs yields more than proportional increase in output
- doubling every input yields more than double output

question

constant returns to scale:

answer

doubling input yields double output

question

decreasing returns to scale:

answer

when output increases less than in proportion to an increase in all inputs

question

Fixed cost (FC):

answer

cost that does not vary with the level of output in the short run (the cost of all fixed factors of production)

question

Variable cost (VC):

answer

costs that varies with the level of output in the short run (the cost of all variable factors of production)

question

Total cost (TC):

answer

all costs of production: the sum of variable cost and fixed cost

question

average fixed cost (AFC):

answer

fixed cost divided by the quantity of output
AFC = FC/Q

question

average variable cost (AVC):

answer

variable cost divided by the quantity of output (AVC = VC/Q)

question

Average Total Cost (ATC):

answer

total costs divided by quantity of output ATC=TC/Q

question

marginal cost (MC):

answer

the change in total costs associated with a one-unit change in output
MCq1= DeltaTC/deltaQ
or VC/DQ

question

Isocost line:

answer

a set of input bundles each of which costs the same amount
Finds:
-Maximum output for a given expenditure
-minimum cost for a given level of output

question

Output Expansion Path:

answer

the locus of tangencies (minimum-cost input combinations) traced out by an isocost line of given slope as it shifts outward into the isoquant map for a production process

question

LMC:

answer

long run marginal cost

question

LAC:

answer

long run average cost

question

Natural monopoly:

answer

an industry whose market output is produced at the lowest cost when production is concentrated in the hands of a single firm

question

answer

quantity of output

question

answer

quantity of labor

question

economic profit:

answer

the difference between total revenue and total cost, where total cost includes all costs- both explicit and implicit- associated with resources used by the firm

question

Firm sell a standardized product:

answer

the product sold by one firm is assumed to be a perfect substitute for the product sold by any other

question

firm are price takers:

answer

this means that the individual firm treats the market price of the product as given

question

Free entry and exit:

answer

With Perfectly Mobile Factors of Production in the Long Run

question

four conditions for perfect competition:

answer

1. Firms Sell a Standardized Product
2. Firms Are Price Takers
3. Free Entry and Exit
4. Firms and Consumers Have Perfect Information

question

Marginal revenue:

answer

the change in total revenue that occurs as a result of a 1-unit change in sales

question

shutdown condition:

answer

if price falls below the minimum of average variable cost, the firm should shut down in the short run.

question

Short-run supply curve:

answer

A supply curve that shows the quantity of a product a firm in a purely competitive industry will offer to sell at various prices in the short run; the portion of the firm's short-run marginal cost curve that lies above its average-variable-cost curve.

question

Breakeven point:

answer

the point at which price equal to the minimum of average total cost
- The lowest price at which the firm will not suffer negative profits in the short run

question

allocative efficiency:

answer

a condition in which all possible gains from exchange are realized.

question

producer surplus:

answer

the dollar amount by which a firm benefits by producing a profit-maximizing level of output.

question

Maximum profit (pie symbol)

answer

TR-TC

question

Producer surplus (PS):

answer

TR-VC

question

Constant cost industries:

answer

long-run supply curve is a horizontal line at the minimum value of the LAC curve

question

Increasing cost industries:

answer

long run supply curve is upward sloping

question

decreasing cost industries:

answer

long run supply curve is downward sloping

question

Price elasticity of supply:

answer

the percentage change in quantity supplied that occurs in response to a 1 percent change in price

1 of 60

question

Altruism:

answer

unselfish regard for the welfare of others

question

Present-aim standard:

answer

a person is rational if she is efficient in the pursuit of whatever aims she happens to hold at the moment of action.

question

self-interest standard:

answer

a person is rational if her motives are congruent with her narrow material interests

question

simple preference:

answer

one that is useful to an individual independent of tastes of other people. (example: taste for food)

question

strategic preference:

answer

one whose usefulness depends on how many others share the taste (example taste for aggressive behavior) (hawks perfer, doves avoid)

question

rational choice model:

answer

regards the consumers tastes as given

question

ecological models:

answer

ask where those tastes come from

question

commitment problems:

answer

games where the common feature is that people can do better if they can commit themselves to behave in a way that will later be inconsistent with their own material interests

question

commitment device:

answer

a device that commits a person to behave in a certain way in the future, even though he may wish to behave otherwise when the time comes

question

production function:

answer

the relationship that describes how inputs like capital and labor are transformed into output.

question

long run:

answer

the shortest period of time required to alter the amounts of all inputs used in a production process.

question

short run:

answer

the longest period of time during which at least one of the inputs used in a production process cannot be varied

question

variable input:

answer

an input that can be varied in the short run.

question

Fixed input:

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

properties of short term prodctuon:

answer

question

law of diminishing return:

answer

if other inputs are fixed, the increase in outputs from an increase in the variable input must eventually decline

question

total product curve:

answer

a curve showing the amount of output as a function of the amount of variable input

question

marginal product:

answer

change in total product due to a 1-unit change in the variable input
MP= DeltaQ/DeltaL

question

average product:

answer

total output divided by the quantity of the variable input
AP=Q/L

question

Isoquant:

answer

the set of all input combinations that yield a given level of output
- similar to indifference curve

question

marginal rate of technical substitution (MRTS):

answer

the rate at which one input can be exchanged for another without altering the total level of output
MRTS= Delta K/ Delta L

question

answer

capital

question

answer

Labor

question

perfect substitutes:

answer

two goods with straight-line indifference curves

question

perfect complements

answer

two goods with right-angle indifference curves

question

Why are some industries comprised of many small firms and others few large firms?

answer

relationship between efficiency and size

question

increasing returns to scale:

answer

the property of a production function whereby a proportional increase in every inputs yields more than proportional increase in output
- doubling every input yields more than double output

question

constant returns to scale:

answer

doubling input yields double output

question

decreasing returns to scale:

answer

when output increases less than in proportion to an increase in all inputs

question

Fixed cost (FC):

answer

cost that does not vary with the level of output in the short run (the cost of all fixed factors of production)

question

Variable cost (VC):

answer

costs that varies with the level of output in the short run (the cost of all variable factors of production)

question

Total cost (TC):

answer

all costs of production: the sum of variable cost and fixed cost

question

average fixed cost (AFC):

answer

fixed cost divided by the quantity of output
AFC = FC/Q

question

average variable cost (AVC):

answer

variable cost divided by the quantity of output (AVC = VC/Q)

question

Average Total Cost (ATC):

answer

total costs divided by quantity of output ATC=TC/Q

question

marginal cost (MC):

answer

the change in total costs associated with a one-unit change in output
MCq1= DeltaTC/deltaQ
or VC/DQ

question

Isocost line:

answer

a set of input bundles each of which costs the same amount
Finds:
-Maximum output for a given expenditure
-minimum cost for a given level of output

question

Output Expansion Path:

answer

the locus of tangencies (minimum-cost input combinations) traced out by an isocost line of given slope as it shifts outward into the isoquant map for a production process

question

LMC:

answer

long run marginal cost

question

LAC:

answer

long run average cost

question

Natural monopoly:

answer

an industry whose market output is produced at the lowest cost when production is concentrated in the hands of a single firm

question

answer

quantity of output

question

answer

quantity of labor

question

economic profit:

answer

the difference between total revenue and total cost, where total cost includes all costs- both explicit and implicit- associated with resources used by the firm

question

Firm sell a standardized product:

answer

the product sold by one firm is assumed to be a perfect substitute for the product sold by any other

question

firm are price takers:

answer

this means that the individual firm treats the market price of the product as given

question

Free entry and exit:

answer

With Perfectly Mobile Factors of Production in the Long Run

question

four conditions for perfect competition:

answer

1. Firms Sell a Standardized Product
2. Firms Are Price Takers
3. Free Entry and Exit
4. Firms and Consumers Have Perfect Information

question

Marginal revenue:

answer

the change in total revenue that occurs as a result of a 1-unit change in sales

question

shutdown condition:

answer

if price falls below the minimum of average variable cost, the firm should shut down in the short run.

question

Short-run supply curve:

answer

question

Breakeven point:

answer

the point at which price equal to the minimum of average total cost
- The lowest price at which the firm will not suffer negative profits in the short run

question

allocative efficiency:

answer

a condition in which all possible gains from exchange are realized.

question

producer surplus:

answer

the dollar amount by which a firm benefits by producing a profit-maximizing level of output.

question

Maximum profit (pie symbol)

answer

TR-TC

question

Producer surplus (PS):

answer

TR-VC

question

Constant cost industries:

answer

long-run supply curve is a horizontal line at the minimum value of the LAC curve

question

Increasing cost industries:

answer

long run supply curve is upward sloping

question

decreasing cost industries:

answer

long run supply curve is downward sloping

question

Price elasticity of supply:

answer

the percentage change in quantity supplied that occurs in response to a 1 percent change in price

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