econ ch 8 - Assignment Essays

question

total revenue

answer

amount a firm receives from the sale of the goods and services it produces

question

total cost

answer

the amount a firm spends in order to produce goods and services

question

profit =

answer

total revenue - total cost

question

explicit cost

answer

tangible out-of-pocket expenses

question

implicit costs

answer

the opportunity costs of doing business, what are the other things they could have done with money?

question

total costs =

answer

explicit costs + implicit costs

question

accounting profit=

answer

total revenue - explicit costs

question

economic profit

answer

total revenues - (explicit costs + implicit costs)
accounting profit - implicit cost
This means economic profit is always less than accounting profit.

question

factors of production

answer

the inputs used in producing goods and services.
They include land, labor, and capital.
- land is geographic locations owned by company. Building is not land, capital. If it's not land or people, it's capital

question

production function

answer

describes the relationship between inputs a firm
uses and the output it creates.
- important in firm making

question

marginal product

answer

the change in output associated with one additional
unit of input (ceteris paribus).
-all inputs except labor are fixed
-apple adds one more worker, iPhone production increases from 1000-1050 iPhones a day. Marginal production = 50 iPhones a day

question

diminishing marginal product

answer

occurs when successive increases in
inputs are associated with a slower rise in output.
(where curve of production starts to get flatter)

question

variable costs

answer

costs that change with the rate of output

question

fixed costs

answer

unavoidable costs which do not vary with output.
I In the long run, no costs are fixed

question

marginal costs

answer

the change in total cost associated with a one unit
increase in output.
-avg total cost is always above avg variable cost

question

Efficency scale

answer

the output level that minimizes the avg total cost
ATC=AVC+AFC
-in long run all costs are variable, gives firms more control over their costs, allowing them to reach desired level of output

question

Scale

answer

the size of the production process (3 types)

question

3 types of production process

answer

1. economies of scale: occur when costs decline as output expands in the long run (buying in bulk)
2. dis economies of scale: occur when costs arise as output expands in the long run
3. constant returns to scale: occur when costs remain constant as output expands in the long run, per unit cost, avg cost stays the same

question

If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced

answer

increases at an increasing rate

question

a market has reached an efficient outcome when

answer

total surplus is maximized

question

if a firm hires another worker and her marginal product of labor is negative, we know that the firm's total output is

answer

decreasing

question

social costs=

answer

internal costs+external costs

question

a firm's economic profit is always less than its accounting profit because

answer

economic profit considers implicit costs, which accounting profit does not

question

lauren is the owner of a bakery that earns 0 economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:

answer

$53,000
145-12-65-15* implicit=0
53-implicit=0
53=implicit

question

average fixed cost=

answer

AVC+AFC

question

darrel owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are

answer

$150,000

question

lauren owns a bakery that produces, among other things, wedding cakes. She currently has 6 employees; with 6 employees, her baker can produce 9 wedding cakes per day. If she hired a seventh employee, she'd be able to produce 12 wedding cakes per day. Therefore, the marginal product of the seventh employee is ___ wedding cakes.

answer

question

a firm's production function is similar to recipe used to make a cake in the sense that the production function shows us the combination of ____ used to produce ____

answer

inputs; outputs

question

the average total cots of production is minimized at what level of output

answer

where MC and ATC intersect

question

accounting profit is equal to

answer

total revenue minus explicit costs

question

the out-of-pocket expenses incurred in producing a good are also known as

answer

explicit costs

question

if a firms average total costs decrease as it increases its scale of production, the firm is experiencing:

answer

economies of scale

question

a firms inputs are also known as its

answer

factors of production

question

diseconomies

answer

ATC increases, as it increases its scale of production

question

total revenue minus total cost is equal to

answer

profit

question

which of the following can we learn by looking at a firm's short-run costs?

answer

the costs-minimizing level of output

question

which of the following is most likely to exhibit free entry?

answer

restaurants

question

the change in revenue associated with a one-unit increase in production is known as

answer

marginal revenue

question

costs that have been incurred as a result of past decisions are known as

answer

sunk costs

question

imagine Bob owns a burger restaurant, Bob's Burgers, which operates in a perfectly competitive market. In the short run, if Bob faces a marginal cost of $3.50 per burger and sells his burgers for $4.00 a piece, which of the following is true?

answer

Bob is not profit maximizing. If Bob increased production, he would also increase profits

question

which of the following is not a characteristic of a perfectly competitive firm?

answer

all of the above are characteristics of competitive firm

question

why can't a firm in a perfectly competitive market maintain positive economic profits in the long run ?

answer

if a firm is facing positive economic profits, competition will enter the market, decreasing price until economic profits are eliminated

question

in which of the following short-run scenarios should a firm in a perfectly competitive market shut down?

answer

P<AVC

question

which of the following is not true of the profit-maximizing rule?

answer

following the profit-maximizing rule always lead a firm in a perfectly competitive market to have positive economic profits

1 of 44

question

total revenue

answer

amount a firm receives from the sale of the goods and services it produces

question

total cost

answer

the amount a firm spends in order to produce goods and services

question

profit =

answer

total revenue - total cost

question

explicit cost

answer

tangible out-of-pocket expenses

question

implicit costs

answer

the opportunity costs of doing business, what are the other things they could have done with money?

question

total costs =

answer

explicit costs + implicit costs

question

accounting profit=

answer

total revenue - explicit costs

question

economic profit

answer

total revenues - (explicit costs + implicit costs)
accounting profit - implicit cost
This means economic profit is always less than accounting profit.

question

factors of production

answer

question

production function

answer

describes the relationship between inputs a firm
uses and the output it creates.
- important in firm making

question

marginal product

answer

question

diminishing marginal product

answer

occurs when successive increases in
inputs are associated with a slower rise in output.
(where curve of production starts to get flatter)

question

variable costs

answer

costs that change with the rate of output

question

fixed costs

answer

unavoidable costs which do not vary with output.
I In the long run, no costs are fixed

question

marginal costs

answer

the change in total cost associated with a one unit
increase in output.
-avg total cost is always above avg variable cost

question

Efficency scale

answer

the output level that minimizes the avg total cost
ATC=AVC+AFC
-in long run all costs are variable, gives firms more control over their costs, allowing them to reach desired level of output

question

Scale

answer

the size of the production process (3 types)

question

3 types of production process

answer

question

If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced

answer

increases at an increasing rate

question

a market has reached an efficient outcome when

answer

total surplus is maximized

question

if a firm hires another worker and her marginal product of labor is negative, we know that the firm's total output is

answer

decreasing

question

social costs=

answer

internal costs+external costs

question

a firm's economic profit is always less than its accounting profit because

answer

economic profit considers implicit costs, which accounting profit does not

question

answer

$53,000
145-12-65-15* implicit=0
53-implicit=0
53=implicit

question

average fixed cost=

answer

AVC+AFC

question

darrel owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are

answer

$150,000

question

answer

question

a firm's production function is similar to recipe used to make a cake in the sense that the production function shows us the combination of ____ used to produce ____

answer

inputs; outputs

question

the average total cots of production is minimized at what level of output

answer

where MC and ATC intersect

question

accounting profit is equal to

answer

total revenue minus explicit costs

question

the out-of-pocket expenses incurred in producing a good are also known as

answer

explicit costs

question

if a firms average total costs decrease as it increases its scale of production, the firm is experiencing:

answer

economies of scale

question

a firms inputs are also known as its

answer

factors of production

question

diseconomies

answer

ATC increases, as it increases its scale of production

question

total revenue minus total cost is equal to

answer

profit

question

which of the following can we learn by looking at a firm's short-run costs?

answer

the costs-minimizing level of output

question

which of the following is most likely to exhibit free entry?

answer

restaurants

question

the change in revenue associated with a one-unit increase in production is known as

answer

marginal revenue

question

costs that have been incurred as a result of past decisions are known as

answer

sunk costs

question

answer

Bob is not profit maximizing. If Bob increased production, he would also increase profits

question

which of the following is not a characteristic of a perfectly competitive firm?

answer

all of the above are characteristics of competitive firm

question

why can't a firm in a perfectly competitive market maintain positive economic profits in the long run ?

answer

if a firm is facing positive economic profits, competition will enter the market, decreasing price until economic profits are eliminated

question

in which of the following short-run scenarios should a firm in a perfectly competitive market shut down?

answer

P<AVC

question

which of the following is not true of the profit-maximizing rule?

answer

following the profit-maximizing rule always lead a firm in a perfectly competitive market to have positive economic profits

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