question
Cost structure of company
answer
Labor and capital
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Labor
answer
People employed by firm in order to produce goods
question
Capital
answer
All the materials needed in order to produce the goods
question
The Amt. of labor and capital employed at any give time determines how much a firm ____________ produce
answer
Can
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Basic cost function equation
answer
TC= f (L, K)
question
TC
answer
total cost
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L
answer
labor
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K
answer
capital
question
Profit Function Equation
answer
Pi = TR - TC
question
TR
answer
total revenue
question
Cost Minimization equation
answer
TC = Q(2) - Q + 10
question
Q
answer
Output
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ATC
answer
average total cost
question
Average Total Cost equation
answer
TC/ Q = 0.5Q(2) - 10Q + 100 +100/ Q
question
MC
answer
Marginal Cost
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Derivative of TC
answer
MC
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MC intersects ATC at its __________ point
answer
Minimum
question
Costs are Minimized at Min. __________
answer
ATC
question
Set Q to where ___________
answer
MC = ATC
question
Recall ATC =
answer
AVC + AFC
question
At Price below ATC, but Above AVC, a business is...
answer
- Covering all operating costs
- some of its fixed costs
- some of its fixed costs
question
At exactly P= AVC a business is able to...
answer
- pay for operating costs
- None of its fixed costs
- None of its fixed costs
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Any price above P = AVC a business...
answer
Should continue to operate in the short run
question
If P < AVC a business...
answer
- Cannot pay operational costs
- should stop operating
- should stop operating
question
Are Short- Run shut downs permanent?
answer
No
question
Long - Run exit condition
answer
- No fixed costs
- everything can be changed
no shutdown condition
- everything can be changed
no shutdown condition
question
Economies of scale
answer
ATC decreases with output
question
diseconomies of scale
answer
ATC increases with Increasing out put
question
Constant returns of scale
answer
ATC doesn't change with increasing or decreasing output
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