Micro unit 2 - Assignment Essays

question

Production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces.

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Short run

answer

the time period in which at least one input is fixed

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Fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

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Variable input

answer

an input whose quantity the firm can vary at any time

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Long run

answer

the time period in which all inputs can be varied

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Total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

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Marginal product

answer

the additional quantity of output produced by using one more unit of an input

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Diminishing returns

answer

when an increase in the quantity of an input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

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total cost (TC)

answer

total fixed costs plus total variable costs

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total cost curve

answer

shows how total cost depends on the quantity of output

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fixed cost (FC)

answer

cost that does not vary with the quantity produced

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variable cost (VC)

answer

cost that varies with the quantity produced

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average total cost

answer

total cost divided by the quantity of output

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U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

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AFC

answer

FC/Quantity

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AVC

answer

VC/Q

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minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

Average product curve

answer

shows the relationship between the average product and the quantity of the input

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long run average total cost curve (LRATC)

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

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economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

diseconomies of scale

answer

the property whereby long-run average total cost rises as the quantity of output increases

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increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

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decreasing returns to scale

answer

when output increases less than in proportion to an increase in all inputs

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constant returns to scale

answer

when long-run average total cost is constant as output increases

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sunk cost

answer

a cost that has already been committed and cannot be recovered

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cost minimization rule

answer

employ factors so that the marginal product per dollar spent on each factor is the same; this rule is used by a firm to determine the cost-minimizing combination of inputs.

question

capital intensive

answer

production that uses a large amount of capital

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labor intensive

answer

production that uses a large amount of labor

question

explicit costs

answer

input costs that require an outlay of money by the firm

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implicit costs

answer

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

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economic profit

answer

total revenue - explicit costs - implicit costs

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implicit costs of capital

answer

the opportunity cost of the capital used by a business—the income the owner could have realized from that capital if it had been used in its next best alternative way

question

accounting profit

answer

total revenue - explicit costs

question

normal profit

answer

An economic profit equal to zero

question

optimal output rule

answer

says that profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

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Marginal revenue curve

answer

shows how marginal revenue varies as output varies

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marginal revenue

answer

the change in total revenue from an additional unit sold

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marginal cost curve

answer

shows how the cost of producing one more unit depends on the quantity that has already been produced

question

principle of marginal analysis

answer

every activity should continue until marginal benefit equals marginal cost

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public ownership of a monopoly

answer

the good is supplied by the government or by a firm owned by the government

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price regulation

answer

limits the price that a monopolist is allowed to charge

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single-price monopoly

answer

a firm that must sell each unit of its output for the same price to all its customers

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price discrimination

answer

division of customers into groups based on how much they will pay for a good

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perfect price discrimination

answer

Occurs when a firm charges the maximum amount that buyers are willing to pay for each unit.

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Interdependence

answer

A relationship between countries in which they rely on one another for resources, goods, or services

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Duopoly

answer

an oligopoly consisting of only two firms

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Duopolist

answer

one of the two firms in a duopoly

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Cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

collusion

answer

when sellers cooperate to raise their joint profits

question

noncooperative behavior

answer

when firms ignore the effects of their actions on each others' profits

1 of 50

question

Production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces.

question

Short run

answer

the time period in which at least one input is fixed

question

Fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

Variable input

answer

an input whose quantity the firm can vary at any time

question

Long run

answer

the time period in which all inputs can be varied

question

Total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

question

Marginal product

answer

the additional quantity of output produced by using one more unit of an input

question

Diminishing returns

answer

when an increase in the quantity of an input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

question

total cost (TC)

answer

total fixed costs plus total variable costs

question

total cost curve

answer

shows how total cost depends on the quantity of output

question

fixed cost (FC)

answer

cost that does not vary with the quantity produced

question

variable cost (VC)

answer

cost that varies with the quantity produced

question

average total cost

answer

total cost divided by the quantity of output

question

U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

question

AFC

answer

FC/Quantity

question

AVC

answer

VC/Q

question

minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

Average product curve

answer

shows the relationship between the average product and the quantity of the input

question

long run average total cost curve (LRATC)

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

diseconomies of scale

answer

the property whereby long-run average total cost rises as the quantity of output increases

question

increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

question

decreasing returns to scale

answer

when output increases less than in proportion to an increase in all inputs

question

constant returns to scale

answer

when long-run average total cost is constant as output increases

question

sunk cost

answer

a cost that has already been committed and cannot be recovered

question

cost minimization rule

answer

employ factors so that the marginal product per dollar spent on each factor is the same; this rule is used by a firm to determine the cost-minimizing combination of inputs.

question

capital intensive

answer

production that uses a large amount of capital

question

labor intensive

answer

production that uses a large amount of labor

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

economic profit

answer

total revenue - explicit costs - implicit costs

question

implicit costs of capital

answer

the opportunity cost of the capital used by a business—the income the owner could have realized from that capital if it had been used in its next best alternative way

question

accounting profit

answer

total revenue - explicit costs

question

normal profit

answer

An economic profit equal to zero

question

optimal output rule

answer

says that profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

question

Marginal revenue curve

answer

shows how marginal revenue varies as output varies

question

marginal revenue

answer

the change in total revenue from an additional unit sold

question

marginal cost curve

answer

shows how the cost of producing one more unit depends on the quantity that has already been produced

question

principle of marginal analysis

answer

every activity should continue until marginal benefit equals marginal cost

question

public ownership of a monopoly

answer

the good is supplied by the government or by a firm owned by the government

question

price regulation

answer

limits the price that a monopolist is allowed to charge

question

single-price monopoly

answer

a firm that must sell each unit of its output for the same price to all its customers

question

price discrimination

answer

division of customers into groups based on how much they will pay for a good

question

perfect price discrimination

answer

Occurs when a firm charges the maximum amount that buyers are willing to pay for each unit.

question

Interdependence

answer

A relationship between countries in which they rely on one another for resources, goods, or services

question

Duopoly

answer

an oligopoly consisting of only two firms

question

Duopolist

answer

one of the two firms in a duopoly

question

Cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

collusion

answer

when sellers cooperate to raise their joint profits

question

noncooperative behavior

answer

when firms ignore the effects of their actions on each others' profits

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