Microeconomics Ch 13 the costs of production

question

law off supply

answer

firms are willing to produce and sell a greater quantity of a good when the price of a good is higher

question

industrial organization

answer

a part of economics that studies how firms decisions about prices and quantities depend on the market conditions they face

question

total revenue

answer

the amount a firm receives for the sale of its output

question

total cost

answer

the market value of the inputs a firm uses in production

question

profit

answer

a firm's total revenue minus its total cost

question

Formula for profit

answer

total revenue - total cost
TR-TC

question

measuring total revenue

answer

the quantity of output the firm produces multiplied by the price at which it sells its output

question

formula for total revenue

answer

price x quantity sold

question

opportunity cost

answer

all the things given up to acquire an item

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

total cost is the sum of

answer

explicit and implicit costs

question

formula for total cost

answer

fixed cost + variable cost
FC+VC

question

economic profit

answer

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

question

accounting profit

answer

total revenue minus total explicit cost

question

why are accounting profits higher than economic profits?

answer

because accountants only consider explicit costs. They ignore implicit costs

question

production function shows the relationship between

answer

the number of workers and quantity of output

question

production function image

answer

shows how total cost depends on the quantity of output

question

total cost curve

answer

the increase in output that arises from an additional unit of input

question

marginal product

answer

the property whereby the marginal product of an input declines as the quantity of the input increases (production per worker decreases as you add more workers but overall production can still increase)

question

diminishing marginal product

answer

diminishing marginal product (decrease output per worker)

question

flattening of production function indicates

answer

each unit of production becomes more expensive as production rises

question

steepening of the total-cost curve indicates

answer

Costs that do not vary with the quantity of output produced. ex: rent

question

fixed costs

answer

costs that vary with the quantity of output produced

question

variable costs

answer

total fixed costs plus total variable costs

question

Total Cost (TC)

answer

the total cost divided by the quantity produced

question

average cost per unit

answer

the increase in total cost that arises from an extra unit of production

question

marginal cost

answer

total costs divided by quantity of output

question

Average Total Cost (ATC)

answer

change in total cost / change in quantity

question

marginal cost formula

answer

total cost/quantity

question

average total cost formula

answer

The marginal cost curve crosses the average total cost curve at the

question

minimum of average total cost

answer

U shaped

question

shape of the average total cost curve

answer

its minimum

question

marginal cost curve crosses the average total cost curve at

answer

declines

question

average fixed cost always ___ as output rises

answer

rises

question

average variable cost usually ___ as output increases because of diminishing marginal product

answer

the property whereby long-run average total cost falls as the quantity of output increases. "getting bigger is cheaper"

question

economies of scale

answer

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

question

diseconomies of scale

answer

the property whereby long-run average total cost stays the same as the quantity of output changes

question

constant returns to scale

answer

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1 of 39

question

law off supply

answer

firms are willing to produce and sell a greater quantity of a good when the price of a good is higher

question

industrial organization

answer

a part of economics that studies how firms decisions about prices and quantities depend on the market conditions they face

question

total revenue

answer

the amount a firm receives for the sale of its output

question

total cost

answer

the market value of the inputs a firm uses in production

question

profit

answer

a firm's total revenue minus its total cost

question

Formula for profit

answer

total revenue - total cost
TR-TC

question

measuring total revenue

answer

the quantity of output the firm produces multiplied by the price at which it sells its output

question

formula for total revenue

answer

price x quantity sold

question

opportunity cost

answer

all the things given up to acquire an item

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

total cost is the sum of

answer

explicit and implicit costs

question

formula for total cost

answer

fixed cost + variable cost
FC+VC

question

economic profit

answer

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

question

accounting profit

answer

total revenue minus total explicit cost

question

why are accounting profits higher than economic profits?

answer

because accountants only consider explicit costs. They ignore implicit costs

question

production function shows the relationship between

answer

the number of workers and quantity of output

question

production function image

answer

shows how total cost depends on the quantity of output

question

total cost curve

answer

the increase in output that arises from an additional unit of input

question

marginal product

answer

question

diminishing marginal product

answer

diminishing marginal product (decrease output per worker)

question

flattening of production function indicates

answer

each unit of production becomes more expensive as production rises

question

steepening of the total-cost curve indicates

answer

Costs that do not vary with the quantity of output produced. ex: rent

question

fixed costs

answer

costs that vary with the quantity of output produced

question

variable costs

answer

total fixed costs plus total variable costs

question

Total Cost (TC)

answer

the total cost divided by the quantity produced

question

average cost per unit

answer

the increase in total cost that arises from an extra unit of production

question

marginal cost

answer

total costs divided by quantity of output

question

Average Total Cost (ATC)

answer

change in total cost / change in quantity

question

marginal cost formula

answer

total cost/quantity

question

average total cost formula

answer

The marginal cost curve crosses the average total cost curve at the

question

minimum of average total cost

answer

U shaped

question

shape of the average total cost curve

answer

its minimum

question

marginal cost curve crosses the average total cost curve at

answer

declines

question

average fixed cost always ___ as output rises

answer

rises

question

average variable cost usually ___ as output increases because of diminishing marginal product

answer

the property whereby long-run average total cost falls as the quantity of output increases. "getting bigger is cheaper"

question

economies of scale

answer

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

question

diseconomies of scale

answer

the property whereby long-run average total cost stays the same as the quantity of output changes

question

constant returns to scale

answer

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