question
Short run
answer
the period of time in which at least one input is fixed
question
Long run
answer
the time period in which all inputs can be varied
question
Technology
answer
anything that helps produce faster, better or cheaper
question
Technology change
answer
more outputs with the same inputs or the same output with different inputs
question
Production function
answer
the relationship between quantity of inputs used to make a good and the quantity of outputs of that good
question
Variable costs
answer
cost that can vary
question
Examples of variable costs
answer
-salary payments
-energy, utilities
-raw materials
-labor
-energy, utilities
-raw materials
-labor
question
Fixed costs
answer
costs that remain constant as output changes
question
long-run average cost curve (LARC)
answer
a curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed
question
economies of scale
answer
factors that cause a firm's long-run average cost (LARC) to fall as output rises
question
constant returns to scale
answer
the situation in which a firm's long-run average costs (LARC) remain unchanged as it increases output
question
diseconomies of scale
answer
the situation in which a firm's long-run average costs (LARC) rise as the firm increases output
question
Fixed cost equation
answer
FC= Qk * Pk
question
Total cost equation
answer
TC= FC + VC
question
minimum efficent scale
answer
The lowest point on a cost curve at which a company can produce at a competitive price
question
perfect competition characteristics
answer
- many buyers
- identical products
- no barriers to firms exiting/entering the market
- no externalities
- perfect information
- identical products
- no barriers to firms exiting/entering the market
- no externalities
- perfect information
question
price takers
answer
firms that take or accept the market price and have no ability to influence that price
question
profit? loss? breakeven?
answer
TR > TC = Profit
TR < TC = Loss
TR = TC Breakeven
TR < TC = Loss
TR = TC Breakeven
question
profit maximized when
answer
MR = MC and TR - TC
question
Shut down rule equation
answer
P * Q < VC
question
produce? shutdown? indifferent?
answer
P > AVC = produce
P < AVC = shutdown
P = AVC = indifferent
P < AVC = shutdown
P = AVC = indifferent
question
productive efficiency
answer
a good or service is produced at the lowest possible cost
question
allocative efficiency
answer
production is in accordance with consumer preferences, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it
question
Marginal Revenue equation
answer
MR = change in TR / change in Q
question
Average Revenue equation
answer
AR = TR/Q
question
Total Revenue equation
answer
TR = P * Q
question
MR. DARP
answer
Marginal Revenue = Demand = Average Revenue = Price
question
calculating profit steps
answer
- Find where MR = MC (Q*)
- Find Total Revenue (TR = P * Q)
- Use Q* to go to ATC curve.
- Find Total Cost (TC = ATC * Q)
- Subtract
- If TR > TC = PROFIT, TR < TC = LOSS, TR = TC BREAKEVEN
- Find Total Revenue (TR = P * Q)
- Use Q* to go to ATC curve.
- Find Total Cost (TC = ATC * Q)
- Subtract
- If TR > TC = PROFIT, TR < TC = LOSS, TR = TC BREAKEVEN
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
