Micro SG - Assignment Essays

question

marginal utility

answer

satisfaction or usefulness obtained from acquiring one more unit of a product

question

law of diminishing marginal utility

answer

consumers experience diminishing additional satisfaction as they consume more of a good or service

question

marginal utility per dollar

answer

marginal utility / price

question

Utility Maximization

answer

marginal utility per dollar of both goods is equal
use entire budget

question

Budget Constraint

answer

limited amount of income available to spend

question

Marginal utility is more useful than total utility in consumer decision making because

answer

optimal decisions are made at the margin

question

The rule of equal marginal utility per dollar spent suggests that consumers maximize utility by

answer

equalizing the marginal utility per dollar spent across goods and services.

question

marginal rate of substitution

answer

price of the good on x-axis / price of the good on the y-axis

question

Technology

answer

process of using inputs to make outputs

question

technological change

answer

a firm is able to produce the same output using fewer inputs or more output using same inputs

question

example of negative technological change

answer

a hurricane damages a firm's facilities

question

examples of technology

answer

firm operations, like skills of managers and speed of machinery

question

A firm is able to cut each worker's wage rate by 10 percent and still produce the same level of output.

answer

not positive technological change

question

A training program makes a firm's workers more productive.

answer

positive technological change

question

An exercise program makes a firm's workers more healthy and productive.

answer

positive technological change

question

A firm cuts its workforce and is able to maintain its initial level of output.

answer

positive technological change

question

A firm rearranges the layout of its factory and finds that by using its initial set of inputs, it can produce exactly as much as before.

answer

not positive technological change

question

example of positive technological change

answer

installing more reliable equipment

question

short run

answer

at least one of a firm's inputs is fixed

question

long run

answer

a firm is able to vary all its inputs, change the size of its physical plant, and adopt new technology

question

fixed cost

answer

Any cost that remains unchanged as output changes

question

variable cost

answer

Any cost that changes as output changes

question

fixed cost example

answer

insurance

question

variable cost example

answer

cost of shipping products

question

implicit costs

answer

a nonmonetary opportunity cost.

question

explicit costs

answer

costs that involve spending money

question

production function

answer

illustrates the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs

question

A short-run production function holds constant

answer

the amount of capital

question

total cost

answer

fixed cost + variable cost

question

average total cost

answer

total cost/quantity

question

economic costs

answer

explicit costs + implicit costs

question

accounting costs

answer

explicit costs

question

law of diminishing returns

answer

adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline

question

law of diminishing returns is

answer

only in the short run

question

average product of labor

answer

total output/quantity of workers

question

gains from division of labor

answer

occur whenever production of a good or provision of a service has multiple tasks.

question

marginal product of labor is rising =

answer

marginal cost of production is falling

question

The marginal cost curve intersects the average
total
cost curve at the level of output where average
total
cost is at a minimum because

answer

when the marginal cost of the last unit produced is below the average, it pulls the average down, and when the marginal cost is above the averge, it pulls the average up.

question

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing?

answer

Yes. If marginal cost is less than average total cost, then average total cost will be decreasing.

question

Graphically, the marginal cost curve is

answer

a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

question

marginal cost formula

answer

change in total cost / change in quantity

question

the total cost of production ______ the variable cost of production in the long run

answer

equals

question

Minimum efficient scale

answer

the level of output at which
all economies of scale are exhausted.

question

economies of scale

answer

when a firm's long-run average costs decrease with output.

question

diseconomies of scale

answer

when a firm's long-run average costs increase with output.

question

The short-run average cost can never be less the long-run average costs because

answer

in the long run, all inputs are adjusted including the ones that are fixed in the short run.

question

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

answer

economies of scale

question

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

answer

diseconomies of scale

question

total fixed cost

answer

Total cost - Total variable cost

question

If the marginal cost curve is below the average variable cost curve, then

answer

AVC is decreasing

question

diseconomies of scale only apply in the ...

answer

long run

question

When a firm's long−run average cost curve is horizontal for a range of output, then in that range production displays

answer

constant returns to scale

question

In the short run, if the marginal product is at its maximum, then the

answer

MC is at its max

question

output changes in the short run

answer

output will first increase at an increasing rate, then output will increase at a decreasing rate.

question

perfectly competitive market

answer

- many buyers and sellers
- all firms selling identical products
- no barriers to new firms entering the market.

question

In perfectly competitive markets, prices are determined by

answer

the interaction of market demand and supply because firms and consumers are price takers.

question

in a perfectly competitive market,

answer

Price = MR = AR = MC

question

Profit in perfectly competitive market

answer

maximized where MR = MC

question

shutdown point in the short run

answer

the minimum point on the
average variable cost curve

question

exit point in the long run

answer

the minimum point on the average total cost curve.

question

marginal cost curve =

answer

supply curve above the average variable cost

question

shut down if

answer

P < AVC

question

P > ATC

answer

profit

question

P < ATC

answer

loss

question

P = ATC

answer

break even

question

when firms exit the market...

answer

supply decreases
price increases

question

allocative efficiency

answer

goods/services produced up to the point where
the marginal benefit for consumers
equals
the marginal cost of producing it.

question

productive efficiency

answer

a situation in which a good or service is produced at the lowest possible cost

question

perfect competition curves

answer

the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

question

If a typical firm in a perfectly competitive industry is earning profits, then

answer

-nnew firms will enter in the long run
- market supply to increase
- market price to fall, - profits to decrease.

question

monopoly

answer

a firm that is the only seller of a good or service that does not have a close substitute.

question

reasons a firm becomes a monopoly

answer

the government blocks entry, control of a key resource, network externalities, and economies of scale.

question

marginal product of labor is falling =

answer

marginal cost of production is rising

question

indifference curve

answer

a curve that shows consumption bundles that give the consumer the same utility

question

higher up (to the right) on the indifference curve

answer

= greater utility

question

bundles on the same indifference curve

answer

= same utility

question

slope of indifference curve

answer

marginal rate of substitution

question

indifference curves _____ cross

answer

can't

question

Marginal Rate of Technical Substitution

answer

the rate at which a firm is able to substitute one input for another while keeping the level of output constant

question

Isoquant

answer

a curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output

question

isocost line

answer

all the combinations of two inputs, such as capital and labor, that have the same total cost

question

MRTS

answer

price of good on x-axis / price of good on y-axis

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

slope of budget constraint

answer

Px/Py

1 of 84

question

marginal utility

answer

satisfaction or usefulness obtained from acquiring one more unit of a product

question

law of diminishing marginal utility

answer

consumers experience diminishing additional satisfaction as they consume more of a good or service

question

marginal utility per dollar

answer

marginal utility / price

question

Utility Maximization

answer

marginal utility per dollar of both goods is equal
use entire budget

question

Budget Constraint

answer

limited amount of income available to spend

question

Marginal utility is more useful than total utility in consumer decision making because

answer

optimal decisions are made at the margin

question

The rule of equal marginal utility per dollar spent suggests that consumers maximize utility by

answer

equalizing the marginal utility per dollar spent across goods and services.

question

marginal rate of substitution

answer

price of the good on x-axis / price of the good on the y-axis

question

Technology

answer

process of using inputs to make outputs

question

technological change

answer

a firm is able to produce the same output using fewer inputs or more output using same inputs

question

example of negative technological change

answer

a hurricane damages a firm's facilities

question

examples of technology

answer

firm operations, like skills of managers and speed of machinery

question

A firm is able to cut each worker's wage rate by 10 percent and still produce the same level of output.

answer

not positive technological change

question

A training program makes a firm's workers more productive.

answer

positive technological change

question

An exercise program makes a firm's workers more healthy and productive.

answer

positive technological change

question

A firm cuts its workforce and is able to maintain its initial level of output.

answer

positive technological change

question

A firm rearranges the layout of its factory and finds that by using its initial set of inputs, it can produce exactly as much as before.

answer

not positive technological change

question

example of positive technological change

answer

installing more reliable equipment

question

short run

answer

at least one of a firm's inputs is fixed

question

long run

answer

a firm is able to vary all its inputs, change the size of its physical plant, and adopt new technology

question

fixed cost

answer

Any cost that remains unchanged as output changes

question

variable cost

answer

Any cost that changes as output changes

question

fixed cost example

answer

insurance

question

variable cost example

answer

cost of shipping products

question

implicit costs

answer

a nonmonetary opportunity cost.

question

explicit costs

answer

costs that involve spending money

question

production function

answer

illustrates the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs

question

A short-run production function holds constant

answer

the amount of capital

question

total cost

answer

fixed cost + variable cost

question

average total cost

answer

total cost/quantity

question

economic costs

answer

explicit costs + implicit costs

question

accounting costs

answer

explicit costs

question

law of diminishing returns

answer

adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline

question

law of diminishing returns is

answer

only in the short run

question

average product of labor

answer

total output/quantity of workers

question

gains from division of labor

answer

occur whenever production of a good or provision of a service has multiple tasks.

question

marginal product of labor is rising =

answer

marginal cost of production is falling

question

The marginal cost curve intersects the average
total
cost curve at the level of output where average
total
cost is at a minimum because

answer

when the marginal cost of the last unit produced is below the average, it pulls the average down, and when the marginal cost is above the averge, it pulls the average up.

question

Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing?

answer

Yes. If marginal cost is less than average total cost, then average total cost will be decreasing.

question

Graphically, the marginal cost curve is

answer

a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

question

marginal cost formula

answer

change in total cost / change in quantity

question

the total cost of production ______ the variable cost of production in the long run

answer

equals

question

Minimum efficient scale

answer

the level of output at which
all economies of scale are exhausted.

question

economies of scale

answer

when a firm's long-run average costs decrease with output.

question

diseconomies of scale

answer

when a firm's long-run average costs increase with output.

question

The short-run average cost can never be less the long-run average costs because

answer

in the long run, all inputs are adjusted including the ones that are fixed in the short run.

question

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

answer

economies of scale

question

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

answer

diseconomies of scale

question

total fixed cost

answer

Total cost - Total variable cost

question

If the marginal cost curve is below the average variable cost curve, then

answer

AVC is decreasing

question

diseconomies of scale only apply in the ...

answer

long run

question

When a firm's long−run average cost curve is horizontal for a range of output, then in that range production displays

answer

constant returns to scale

question

In the short run, if the marginal product is at its maximum, then the

answer

MC is at its max

question

output changes in the short run

answer

output will first increase at an increasing rate, then output will increase at a decreasing rate.

question

perfectly competitive market

answer

- many buyers and sellers
- all firms selling identical products
- no barriers to new firms entering the market.

question

In perfectly competitive markets, prices are determined by

answer

the interaction of market demand and supply because firms and consumers are price takers.

question

in a perfectly competitive market,

answer

Price = MR = AR = MC

question

Profit in perfectly competitive market

answer

maximized where MR = MC

question

shutdown point in the short run

answer

the minimum point on the
average variable cost curve

question

exit point in the long run

answer

the minimum point on the average total cost curve.

question

marginal cost curve =

answer

supply curve above the average variable cost

question

shut down if

answer

P < AVC

question

P > ATC

answer

profit

question

P < ATC

answer

loss

question

P = ATC

answer

break even

question

when firms exit the market...

answer

supply decreases
price increases

question

allocative efficiency

answer

goods/services produced up to the point where
the marginal benefit for consumers
equals
the marginal cost of producing it.

question

productive efficiency

answer

a situation in which a good or service is produced at the lowest possible cost

question

perfect competition curves

answer

the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

question

If a typical firm in a perfectly competitive industry is earning profits, then

answer

-nnew firms will enter in the long run
- market supply to increase
- market price to fall, - profits to decrease.

question

monopoly

answer

a firm that is the only seller of a good or service that does not have a close substitute.

question

reasons a firm becomes a monopoly

answer

the government blocks entry, control of a key resource, network externalities, and economies of scale.

question

marginal product of labor is falling =

answer

marginal cost of production is rising

question

indifference curve

answer

a curve that shows consumption bundles that give the consumer the same utility

question

higher up (to the right) on the indifference curve

answer

= greater utility

question

bundles on the same indifference curve

answer

= same utility

question

slope of indifference curve

answer

marginal rate of substitution

question

indifference curves _____ cross

answer

can't

question

Marginal Rate of Technical Substitution

answer

the rate at which a firm is able to substitute one input for another while keeping the level of output constant

question

Isoquant

answer

a curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output

question

isocost line

answer

all the combinations of two inputs, such as capital and labor, that have the same total cost

question

MRTS

answer

price of good on x-axis / price of good on y-axis

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

slope of budget constraint

answer

Px/Py

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