micro chapter 8 - Assignment Essays %

question

larger firms do not always

answer

have lower costs

question

to be profitable it needs to

answer

provide products consumers want and manage costs

question

total revenue

answer

the amount a firm receives for the sale of its output

question

total cost

answer

total fixed cost + total variable cost

question

profit

answer

firms total revenue minus its total cost

question

loss

answer

total revenue is less than total cost

question

profit (or loss)=

answer

total revenue - total costs

question

total revenue=

answer

sum of profits

question

explicit costs

answer

tangible out-of-pocket expenses

question

example of explicit cost

answer

paying wages to workers

question

implicit costs

answer

cost of resources already owned and opportunity costs

question

example of implicit cost

answer

the opportunity cost of the owner's time

question

total cost=

answer

explicit costs + implicit costs

question

accounting profit

answer

subtracting only explicit costs from total revenue

question

accounting profit=

answer

total revenue - explicit costs

question

economic profit

answer

subtracting both the explicit and implicit costs from total revenue; revenue is larger than costs

question

economic profit=

answer

total revenue - (explicit costs + implicit costs)

question

economic profit is

answer

always less than accounting profit

question

economic profit can be

answer

negative

question

economic loss

answer

revenue is smaller than costs

question

output

answer

product the firm creates

question

the firm should produce output that

answer

is consistent with the largest economic profit

question

factors of production

answer

the inputs used to produce goods and services; land, labor, capital, and entrepreneurial ability

question

production function

answer

the relationship between the inputs a firm uses and output it creates

question

beyond a certain point, the additional labor will

answer

not continue to increase the output at the same rate

question

marginal product

answer

the change in output associated with one additional unit of an input

question

marginal product=

answer

change in output/change in input

question

diminishing marginal product

answer

successive increases in inputs are associated with a slower rise in output

question

diminishing marginal product doesn't always mean

answer

to stop production

question

short run costs can be

answer

variable or fixed; majority are unavoidable costs

question

variable costs

answer

costs that vary with the quantity of output produced

question

example of variable cost

answer

number of workers

question

fixed costs

answer

unavoidable, do not vary with output; overhead

question

Average Variable Cost (AVC)

answer

total variable costs / output

question

Average Fixed Cost (AFC)

answer

total fixed costs / output

question

the best way to lower average fixed costs is

answer

to raise output

question

Average Total Cost (ATC)

answer

AVC+AFC or total cost/ quantity

question

Marginal Cost (MC)

answer

the increase in total cost associated with a one-unit increase in production

question

MC always leads or pulls

answer

average variable cost and average total cost along

question

long run, all costs are

answer

variable and can be renegotiated

question

scale

answer

the size of the production process

question

to change in long run you can

answer

change the scale

question

efficient scale

answer

the quantity of output that minimizes average total cost in long run; MC=ATC

question

long run costs are a reflection of

answer

scale and the cost of providing additional output

question

long run costs can

answer

rise, fall or stay the same

question

economies of scale

answer

long-run average total cost declines as output increases

question

example of economies of scale

answer

national homebuilders

question

diseconomies of scale

answer

long-run average total costs rise as output expands; usually happens when business gets too big

question

Example of diseconomies of scale

answer

large regional hospitals

question

constant returns to scale

answer

long run average total costs remain constant as output expands

question

example of constant returns to scale

answer

Panda Express vs local Chinese restaurant

question

marginal cost plays the most crucial role in

answer

a firms costs structure

question

goal of any business

answer

maximize profit

question

two parts to total cost

answer

explicit and implicit costs

question

profit can be

answer

positive or negative

question

example of explicit costs

answer

employee wages, electricity bill

question

explicit and implicit costs are

answer

equally important

question

diminishing marginal returns

answer

successive increases in input contribute to slower rises in output holding all else equal

question

businesses can make paper profit and

answer

economic loss

question

labor is

answer

the workers

question

land is

answer

space to produce

question

capital is

answer

machinery that makes worker more productive

question

Entrepreneurial ability is

answer

human capital

question

the most important factor of production

answer

is entrepreneural ability

question

production function is used to

answer

determine how productive all of its resources are

question

delta mean

answer

change in

question

delta symbol is

answer

a triangle

question

more of one of the factors of production will cause

answer

output to increase until a certain point

question

zone of production

answer

where businesses hang out. between top of curve and before it goes below x-axis

question

golden rule

answer

MC=MB

question

costs in the short run

answer

only some factors of production can change (usually labor, not capital or land)

question

the more you produce

answer

the more you can spread out your costs

question

AFC always

answer

declines as output rises

question

AVC goes

answer

down then up

question

more workers don't mean

answer

more efficiency; diminishing marginal returns

question

solve for MC by

answer

TC #1-TC#2

question

solve for MR by

answer

MP x price received for good

question

Solve for MP by

answer

difference between output of #2-#1

question

diminishing marginal returns sets in

answer

at highest point of curve

question

Maximizing profits means

answer

following golden rule

question

He should hire when

answer

MR = MC

question

you can see diminishing marginal returns in a table when

answer

AVC is increasing

question

Expanding business

answer

gives more bargaining power to lower his fixed costs. In the long run all costs are variable

1 of 83

question

larger firms do not always

answer

have lower costs

question

to be profitable it needs to

answer

provide products consumers want and manage costs

question

total revenue

answer

the amount a firm receives for the sale of its output

question

total cost

answer

total fixed cost + total variable cost

question

profit

answer

firms total revenue minus its total cost

question

loss

answer

total revenue is less than total cost

question

profit (or loss)=

answer

total revenue - total costs

question

total revenue=

answer

sum of profits

question

explicit costs

answer

tangible out-of-pocket expenses

question

example of explicit cost

answer

paying wages to workers

question

implicit costs

answer

cost of resources already owned and opportunity costs

question

example of implicit cost

answer

the opportunity cost of the owner's time

question

total cost=

answer

explicit costs + implicit costs

question

accounting profit

answer

subtracting only explicit costs from total revenue

question

accounting profit=

answer

total revenue - explicit costs

question

economic profit

answer

subtracting both the explicit and implicit costs from total revenue; revenue is larger than costs

question

economic profit=

answer

total revenue - (explicit costs + implicit costs)

question

economic profit is

answer

always less than accounting profit

question

economic profit can be

answer

negative

question

economic loss

answer

revenue is smaller than costs

question

output

answer

product the firm creates

question

the firm should produce output that

answer

is consistent with the largest economic profit

question

factors of production

answer

the inputs used to produce goods and services; land, labor, capital, and entrepreneurial ability

question

production function

answer

the relationship between the inputs a firm uses and output it creates

question

beyond a certain point, the additional labor will

answer

not continue to increase the output at the same rate

question

marginal product

answer

the change in output associated with one additional unit of an input

question

marginal product=

answer

change in output/change in input

question

diminishing marginal product

answer

successive increases in inputs are associated with a slower rise in output

question

diminishing marginal product doesn't always mean

answer

to stop production

question

short run costs can be

answer

variable or fixed; majority are unavoidable costs

question

variable costs

answer

costs that vary with the quantity of output produced

question

example of variable cost

answer

number of workers

question

fixed costs

answer

unavoidable, do not vary with output; overhead

question

Average Variable Cost (AVC)

answer

total variable costs / output

question

Average Fixed Cost (AFC)

answer

total fixed costs / output

question

the best way to lower average fixed costs is

answer

to raise output

question

Average Total Cost (ATC)

answer

AVC+AFC or total cost/ quantity

question

Marginal Cost (MC)

answer

the increase in total cost associated with a one-unit increase in production

question

MC always leads or pulls

answer

average variable cost and average total cost along

question

long run, all costs are

answer

variable and can be renegotiated

question

scale

answer

the size of the production process

question

to change in long run you can

answer

change the scale

question

efficient scale

answer

the quantity of output that minimizes average total cost in long run; MC=ATC

question

long run costs are a reflection of

answer

scale and the cost of providing additional output

question

long run costs can

answer

rise, fall or stay the same

question

economies of scale

answer

long-run average total cost declines as output increases

question

example of economies of scale

answer

national homebuilders

question

diseconomies of scale

answer

long-run average total costs rise as output expands; usually happens when business gets too big

question

Example of diseconomies of scale

answer

large regional hospitals

question

constant returns to scale

answer

long run average total costs remain constant as output expands

question

example of constant returns to scale

answer

Panda Express vs local Chinese restaurant

question

marginal cost plays the most crucial role in

answer

a firms costs structure

question

goal of any business

answer

maximize profit

question

two parts to total cost

answer

explicit and implicit costs

question

profit can be

answer

positive or negative

question

example of explicit costs

answer

employee wages, electricity bill

question

explicit and implicit costs are

answer

equally important

question

diminishing marginal returns

answer

successive increases in input contribute to slower rises in output holding all else equal

question

businesses can make paper profit and

answer

economic loss

question

labor is

answer

the workers

question

land is

answer

space to produce

question

capital is

answer

machinery that makes worker more productive

question

Entrepreneurial ability is

answer

human capital

question

the most important factor of production

answer

is entrepreneural ability

question

production function is used to

answer

determine how productive all of its resources are

question

delta mean

answer

change in

question

delta symbol is

answer

a triangle

question

more of one of the factors of production will cause

answer

output to increase until a certain point

question

zone of production

answer

where businesses hang out. between top of curve and before it goes below x-axis

question

golden rule

answer

MC=MB

question

costs in the short run

answer

only some factors of production can change (usually labor, not capital or land)

question

the more you produce

answer

the more you can spread out your costs

question

AFC always

answer

declines as output rises

question

AVC goes

answer

down then up

question

more workers don't mean

answer

more efficiency; diminishing marginal returns

question

solve for MC by

answer

TC #1-TC#2

question

solve for MR by

answer

MP x price received for good

question

Solve for MP by

answer

difference between output of #2-#1

question

diminishing marginal returns sets in

answer

at highest point of curve

question

Maximizing profits means

answer

following golden rule

question

He should hire when

answer

MR = MC

question

you can see diminishing marginal returns in a table when

answer

AVC is increasing

question

Expanding business

answer

gives more bargaining power to lower his fixed costs. In the long run all costs are variable

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