Econ for the Professional bju Bradley TEST 3

question

Costs of competition - 3 questions to ask

answer

what price should be set for product?
what quantity should be produced?
when to enter/exit industry?

question

Costs of competition - 3 questions to ask- answer depends on

answer

industry type

question

3 kinds of industries

answer

competitive
monopoly
oligopoly

question

competitive industry

answer

when firms don't have much influence over price of their products

question

competitive industry

answer

product is similar among sellers

question

competitive industry

answer

or many buyers/sellers

question

competitive industry

answer

homogenous product across states

question

homogeneous

answer

of the same kind

question

result of competitive industry

answer

business firms have very little control over price of product

question

competitive firms are called

answer

price takers

question

what determines price?

answer

market supply and demand

question

competitive firms

answer

accept given price

question

competitive firms

answer

can sell all it wants at the market price

question

competitive firms

answer

have a perfectly elastic demand firm

question

competitive firms have a perfectly elastic demand firm because:

answer

increasing/decreasing amt that it sells doesn't change the price

question

to answer questions about cost and profit we need to know

answer

producers objective

question

profit =

answer

TR-TC

question

TR =

answer

P x Q

question

TC =

answer

cost of producing a given quantity of a product

question

total costs include

answer

both explicit and implicit costs

question

explicit costs

answer

input costs that require an outlay of money by the firm

question

implicit costs

answer

input costs that do not require an outlay of money by the firm

question

accounting profit

answer

revenue - expenses

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

maximizing profits

answer

find the quantity for which the difference between TR and TC as large as possible

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

to maximize profit

answer

produce all units for which MR>MC

question

to maximize profit

answer

last unit produced = (MR=MC)

question

In a competitive industry, what is MR?

answer

(PxQ)+(Px1)

question

Profit =

answer

TR-TC

question

total revenue =

answer

P*Q

question

Marginal revenue

answer

change in total revenue / change in quantity

question

marginal cost

answer

change in total cost / change in quantity

question

AC =

answer

TC/Q

question

Profit =

answer

(P-AC) x Q

question

Average cost

answer

TC/Q

question

entry

answer

new business enters industry

question

shut down

answer

stop producing

question

exit

answer

permanently leaving industry

question

long run

answer

time within which all desired entry or exit has occurred

question

short run

answer

time before entry or exit has occurred

question

TFC

answer

production costs that DO NOT vary with output

question

TVC

answer

production costs that vary with output

question

when firms maximize profit they enter when

answer

economic profits are >0

question

when firms maximize profit they exit when

answer

economic profits are <0

question

when economic profits = 0:

answer

profits are equivalent to the accounting profits sufficient to cover the opportunity cost of the capital for the firm

question

0 economic profit

answer

normal profit

question

in the long run firms leave when there is

answer

negative profit

question

in the short run exits ____________ occur immediately

answer

usually cannot

question

whether firms are producing or not,

answer

they must pay fixed costs

question

if profits are negative BUT TR>TC...

answer

the firm should continue producing until it can leave

question

if profits are negative AND TR<TC...

answer

firms should shut down

question

whatever your cost is when output is 0,

answer

is your fixed cost

question

TVC =

answer

TC-TFC

question

If profit is negative at Q*

answer

keep producing at Q* but leave ASAP

question

If P < min AVC

answer

firm will shut down

question

If ATC>p>AVC

answer

Economic loss; Produce in short run

question

If ATC>P

answer

profit is negative

question

If P>AVC

answer

firm is covering part of the cost

question

If P > ATC

answer

the firm is making a profit

question

AVC=

answer

last TC - first TC/Q

1 of 62

question

Costs of competition - 3 questions to ask

answer

what price should be set for product?
what quantity should be produced?
when to enter/exit industry?

question

Costs of competition - 3 questions to ask- answer depends on

answer

industry type

question

3 kinds of industries

answer

competitive
monopoly
oligopoly

question

competitive industry

answer

when firms don't have much influence over price of their products

question

competitive industry

answer

product is similar among sellers

question

competitive industry

answer

or many buyers/sellers

question

competitive industry

answer

homogenous product across states

question

homogeneous

answer

of the same kind

question

result of competitive industry

answer

business firms have very little control over price of product

question

competitive firms are called

answer

price takers

question

what determines price?

answer

market supply and demand

question

competitive firms

answer

accept given price

question

competitive firms

answer

can sell all it wants at the market price

question

competitive firms

answer

have a perfectly elastic demand firm

question

competitive firms have a perfectly elastic demand firm because:

answer

increasing/decreasing amt that it sells doesn't change the price

question

to answer questions about cost and profit we need to know

answer

producers objective

question

profit =

answer

TR-TC

question

TR =

answer

P x Q

question

TC =

answer

cost of producing a given quantity of a product

question

total costs include

answer

both explicit and implicit costs

question

explicit costs

answer

input costs that require an outlay of money by the firm

question

implicit costs

answer

input costs that do not require an outlay of money by the firm

question

accounting profit

answer

revenue - expenses

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

maximizing profits

answer

find the quantity for which the difference between TR and TC as large as possible

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

to maximize profit

answer

produce all units for which MR>MC

question

to maximize profit

answer

last unit produced = (MR=MC)

question

In a competitive industry, what is MR?

answer

(PxQ)+(Px1)

question

Profit =

answer

TR-TC

question

total revenue =

answer

P*Q

question

Marginal revenue

answer

change in total revenue / change in quantity

question

marginal cost

answer

change in total cost / change in quantity

question

AC =

answer

TC/Q

question

Profit =

answer

(P-AC) x Q

question

Average cost

answer

TC/Q

question

entry

answer

new business enters industry

question

shut down

answer

stop producing

question

exit

answer

permanently leaving industry

question

long run

answer

time within which all desired entry or exit has occurred

question

short run

answer

time before entry or exit has occurred

question

TFC

answer

production costs that DO NOT vary with output

question

TVC

answer

production costs that vary with output

question

when firms maximize profit they enter when

answer

economic profits are >0

question

when firms maximize profit they exit when

answer

economic profits are <0

question

when economic profits = 0:

answer

profits are equivalent to the accounting profits sufficient to cover the opportunity cost of the capital for the firm

question

0 economic profit

answer

normal profit

question

in the long run firms leave when there is

answer

negative profit

question

in the short run exits ____________ occur immediately

answer

usually cannot

question

whether firms are producing or not,

answer

they must pay fixed costs

question

if profits are negative BUT TR>TC...

answer

the firm should continue producing until it can leave

question

if profits are negative AND TR<TC...

answer

firms should shut down

question

whatever your cost is when output is 0,

answer

is your fixed cost

question

TVC =

answer

TC-TFC

question

If profit is negative at Q*

answer

keep producing at Q* but leave ASAP

question

If P < min AVC

answer

firm will shut down

question

If ATC>p>AVC

answer

Economic loss; Produce in short run

question

If ATC>P

answer

profit is negative

question

If P>AVC

answer

firm is covering part of the cost

question

If P > ATC

answer

the firm is making a profit

question

AVC=

answer

last TC - first TC/Q

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