Module 3 - Assignment Essays

Q: Increasing returns to Scale imply what?

that with a doubling of inputs, output more than doubles. Since average cost = TC/Outputs, this increase in inputs (increase returns) will cause the numerator to double the old value while the new denominator is more than double the old value. As a result, long-run average cost falls as more output is produced.

question

Shows the max output attainable from a given amt of a fixed input (capital) as the amt of the variable input (labor) is changed.

answer

Total Product Curve

question

Is the Total Product divided by the total amount of the variable input used to produce it is called?

answer

The average produce of an input

question

states that as a firm uses more of a variable input without changing the quantity of fixed inputs, the MP of the variable input will eventually decline

answer

The law of diminishing returns, Because the productivity of additional units of the variable input (Labor) is limited by the lack of the fixed input (machines)

question

What is the zero exponent rule?

answer

A^0 = 1, this says that anything raised to the zero power is 1

question

What is the power rule?

answer

1. to raise a power to a power you need to multiply the exponents.

question

Negative Exponent Rule

answer

1. if the negative exponents in teh numerator get moved to denominator and become positive exponents.

2. negative exponents in the denominator get moved to the numerator and become positive (only move the negative exponent)

question

What is product rule

answer

Says that to multiply two exponents with the same base, you keep the base and add the powers

question

what is the quotient rule

answer

Says that to divide two exponents with the same base, you keep the base and subtract the powers put the anser in teh numerator or denominator depending on where the higher power was located

question

The reason why TP, AP, and MP curves rise reach a max & then fall is due to?

answer

Law of diminishing returns MP

question

Suppose capital and labor are perfect substitutes resulting in a production function of q = K + L. That is, the isoquants are straight lines with a slope of -1. Derive the long-run total cost function TC = C(q) when the wage rate is w and the rental rate on capital is r.

answer

The firm will always hire the input that is cheapest. So, the function is

If w < r, TC = wq.

If w > r, TC = rq.

If w = r, either equation works

question

Where does Marginal Costs Intersect on Iso curves?

answer

intersects average variable cost (and average cost) at its minimum

question

Increasing returns to Scale imply what?

answer

that with a doubling of inputs, output more than doubles. Since average cost = TC/Outputs, this increase in inputs (increase returns) will cause the numerator to double the old value while the new denominator is more than double the old value. As a result, long-run average cost falls as more output is produced.

question

Increasing returns to scale imply what?

answer

Economies of scale, but increase in economies of scale does NOT mean increasing return of scale

question

TR=20Q (what is the firms marginal revenue)

answer

question

Profit Formula =

answer

TR-TC

question

Formula of determining what level of output is total profit maximized?

answer

MR=MC

question

•does not vary with the level of output; includes expenditures on land, office space, production facilities, and other overhead expenses; are often sunk costs, but not always.

answer

Fixed Costs

question

Type of Cost that changes as the quantity of output changes

answer

Variable Cost

question

is the sum of fixed and variable costs

answer

Total Cost

question

What costs should be based on inputs opportunity cost?

answer

Fixed and Variable cost

question

What are the two formula's of Short Run Cost?

answer

TC = VC+FC

AC = C/1 = AFC+AVC

AFC = F/q

AVC = VC/q

question

falls as output rises because the fixed cost is spread over more units

answer

AFC

question

Unit of output may either increase or decrease as output rises is what type of cost?

answer

AVC

question

May either increase or decrease as output rises is what type of cost?

answer

AVC or Variable Cost

AC or Averabe Cost

question

–is the amount by which a firm’s cost changes (or variable cost chg) if the firm produces one more unit of output; ∆C is the change in cost when the change in output, ∆q, is 1 unit.

answer

Marginal Cost = Chg in Cost/Chg qty

MC = Chg in VC/ chg in qty

question

–is the rate of change of cost as we make an infinitesimally small change in output.

answer

MC=dVC/dq because dF/q=0.

question

What is the total Variable cost in this equation? TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

2,000Q−10Q^2+0.25Q^3

question

What is the fixed cost in this equation?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

5,000

question

Calculate the firm's total cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3p

answer

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

question

What is the equation for the firm's average total cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

ATC=TC/Q

= (5000/Q) + 2,000Q/Q - 10Q^2-1/Q +0.25Q^3-1/Q

question

Calculate average total cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

ATC= 500+2,000 - 100 + 25= 2,425 (ATC=TC/Q=24,250/10=2,425).

question

What is the equation for the firm's marginal cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

MC= 2000 - 20Q +0.75(Q^2)

question

Calculate marginal cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

MC=2000 -200 + 75= 1,875

question

What is the equation for the firm's average variable cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC=VC/Q=

(2,000Q - 10Q^2 + 0.25Q^3)/Q= 2,000 - 10Q +0.25Q^2.

question

Calculate average variable cost for Q=10:

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC= 2,000 - 100 + 25= 1,925

question

Calculate average variable cost for Q=20:

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC= 2,000 - 200 + 100 = 1,900

question

The marginal cost curve cuts the average variable cost (AVC) & Avg Cost (AC) curves at what point?

answer

at their minimum

question

In the short run, the firm increases output by using more?

answer

More Labor, however each extra worker increases output by a smaller amount

question

What curve does variable cost and total product curve take, what is the curve determining formula

answer

They follow same shape curve, determined by VC = "W"L" worklabor units

question

Formula: Marginal Cost and curve type?

answer

change in total or variable cost / change in quantity

U-shaped curve

question

In short Run Capital is Fixed, so the chg in variable cost as output increases by one unit, MC, is the change in the what and formula?

answer

Change in the cost of labor, where

MC = wage*extra labor necessary to produce one more unit of output

Chg.VC/Chg.extra.labor

question

what determines the shape of the production function in long run costs?

answer

REturns to scale

question

what determines the average cost curves and other curves?

answer

The production function

question

is the relationship between average costs and cumulative output.

answer

Learning Curve

question

–is the total number of units of output produced since the product was introduced.

answer

Cumulative output

question

–If a firm is operating in the economies of scale section of its average cost curve, expanding output lowers its cost for two reasons.

answer

1. Its average cost falls today because of economies of scale,

2. also because of learning by doing.

question

–A firm enjoys economies of scope if it is less expensive to produce goods how?

answer

jointly than separately.

question

What is the formula to determine Profit and how do you find the profit equation

answer

1. Profit = TR-TC

question

What is the formula to calculate maximizing Profits?

answer

MR=MC (where they intersect)

MR = chg in TR (TR2-TR1)/Q inputs (Q2-Q1)

MC = chg in TC (TC2-TC1)/Q inputs (Q2-Q1)

question

Find profit max; given:

TC = 120 + 2Q^2

TR = 100Q

answer

$1130

question

Given the following:

TR=20Q

TC=75+10Q+0.01𝑄2

a. Find Total Profit Equation

b. Find MR

c. Find MC

d. Find Profit Max point

E. Find Profit Earned

answer

a. What is this firm's total profit equation? Profit = TR – TC = 10Q - 75 - 0.01𝑄2

b. What is the firm's marginal revenue equation? MR= 20

c. What is the firm's marginal cost equation? MC = 10 +0.02Q

d. At what level of output is total profit maximized?

MR=MC = Q = 500.

e. How much profit is earned?

Profit = $2,425

question

What is the formula of Perfect substitute using the linear production function?

answer

(AlphaCapital) + (BetaLabor)

question

What are the two inputs used for production?

answer

1. Capital

2. Labor

question

in short run only 1 input can change and its usually what?

answer

Labor

question

If the production function is given by Q = f (z1, z2) and all inputs are multiplied by the same positive constant (t>1), then, what are the effect of output Returns to scale based on:

1. Equals or constant

2. decreasing or less than

3. increasing or greater than

answer

1. Will increase at exactly % increase

2. Will increase by less than % increase

3. will increase by greater than % increase

question

What is marginal cost?

answer

the additional cost of producing on one additional unit of output

(MC unit2 - MC unit1)

question

What is the formula of following:

1. Total cost?

2. Avg total cost

3. avg fixed cost

4. avg variable cost

5. marginal cost

6. total fixed cost

7. total variable cost

answer

1. TC = TFC + TVC

2. ATC = AFC +AVC or TC/Q

3. AFC = TFC/Q (Fixed cost is constant)

4. AVC = TVC/Q

5. MC = Chg in (TC2-TC1)/chg (Q2-Q1)

6. TFC = fixed cost is independant of production and is constant

7. TVC = TC-TFC

question

What are the profitability formulas to define following:

1. Total Revenue

2. Profit

3. Marginal Revenue

answer

1. TR = Profit * Qty

2. Profit = Total Revenue - Total cost

3. MR = chg in TR/chg Q, then (Profit - TR-TC)

question

What are the following formula's for production function:

1. Marginal Profit

2. Avg Profit

answer

1. MP = chg of Q/chg of L

2. AP = TQ/L

question

What line is the supply line in graph & what lines does it intercept with?

answer

MC and intersects with both ATC & AVC

question

At what point does MC intersect with ATC & AVC?

answer

A their respective minimal or lowest points

question

What portion of the supply curve is the MC?

answer

the portion thats above the AVC

question

What is the shutdown point?

answer

Any que below the intercept point of AVC, firms supply won't produce units below the shut down points

1 of 63

question

Shows the max output attainable from a given amt of a fixed input (capital) as the amt of the variable input (labor) is changed.

answer

Total Product Curve

question

Is the Total Product divided by the total amount of the variable input used to produce it is called?

answer

The average produce of an input

question

states that as a firm uses more of a variable input without changing the quantity of fixed inputs, the MP of the variable input will eventually decline

answer

The law of diminishing returns, Because the productivity of additional units of the variable input (Labor) is limited by the lack of the fixed input (machines)

question

What is the zero exponent rule?

answer

A^0 = 1, this says that anything raised to the zero power is 1

question

What is the power rule?

answer

1. to raise a power to a power you need to multiply the exponents.

question

Negative Exponent Rule

answer

1. if the negative exponents in teh numerator get moved to denominator and become positive exponents.

2. negative exponents in the denominator get moved to the numerator and become positive (only move the negative exponent)

question

What is product rule

answer

Says that to multiply two exponents with the same base, you keep the base and add the powers

question

what is the quotient rule

answer

Says that to divide two exponents with the same base, you keep the base and subtract the powers put the anser in teh numerator or denominator depending on where the higher power was located

question

The reason why TP, AP, and MP curves rise reach a max & then fall is due to?

answer

Law of diminishing returns MP

question

answer

The firm will always hire the input that is cheapest. So, the function is

If w < r, TC = wq.

If w > r, TC = rq.

If w = r, either equation works

question

Where does Marginal Costs Intersect on Iso curves?

answer

intersects average variable cost (and average cost) at its minimum

question

Increasing returns to Scale imply what?

answer

question

Increasing returns to scale imply what?

answer

Economies of scale, but increase in economies of scale does NOT mean increasing return of scale

question

TR=20Q (what is the firms marginal revenue)

answer

question

Profit Formula =

answer

TR-TC

question

Formula of determining what level of output is total profit maximized?

answer

MR=MC

question

•does not vary with the level of output; includes expenditures on land, office space, production facilities, and other overhead expenses; are often sunk costs, but not always.

answer

Fixed Costs

question

Type of Cost that changes as the quantity of output changes

answer

Variable Cost

question

is the sum of fixed and variable costs

answer

Total Cost

question

What costs should be based on inputs opportunity cost?

answer

Fixed and Variable cost

question

What are the two formula's of Short Run Cost?

answer

TC = VC+FC

AC = C/1 = AFC+AVC

AFC = F/q

AVC = VC/q

question

falls as output rises because the fixed cost is spread over more units

answer

AFC

question

Unit of output may either increase or decrease as output rises is what type of cost?

answer

AVC

question

May either increase or decrease as output rises is what type of cost?

answer

AVC or Variable Cost

AC or Averabe Cost

question

–is the amount by which a firm’s cost changes (or variable cost chg) if the firm produces one more unit of output; ∆C is the change in cost when the change in output, ∆q, is 1 unit.

answer

Marginal Cost = Chg in Cost/Chg qty

MC = Chg in VC/ chg in qty

question

–is the rate of change of cost as we make an infinitesimally small change in output.

answer

MC=dVC/dq because dF/q=0.

question

What is the total Variable cost in this equation? TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

2,000Q−10Q^2+0.25Q^3

question

What is the fixed cost in this equation?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

5,000

question

Calculate the firm's total cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3p

answer

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

question

What is the equation for the firm's average total cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

ATC=TC/Q

= (5000/Q) + 2,000Q/Q - 10Q^2-1/Q +0.25Q^3-1/Q

question

Calculate average total cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

ATC= 500+2,000 - 100 + 25= 2,425 (ATC=TC/Q=24,250/10=2,425).

question

What is the equation for the firm's marginal cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

MC= 2000 - 20Q +0.75(Q^2)

question

Calculate marginal cost for Q=10

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

MC=2000 -200 + 75= 1,875

question

What is the equation for the firm's average variable cost?

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC=VC/Q=

(2,000Q - 10Q^2 + 0.25Q^3)/Q= 2,000 - 10Q +0.25Q^2.

question

Calculate average variable cost for Q=10:

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC= 2,000 - 100 + 25= 1,925

question

Calculate average variable cost for Q=20:

TC(Q)=5,000+2,000Q−10Q^2+0.25Q^3

answer

AVC= 2,000 - 200 + 100 = 1,900

question

The marginal cost curve cuts the average variable cost (AVC) & Avg Cost (AC) curves at what point?

answer

at their minimum

question

In the short run, the firm increases output by using more?

answer

More Labor, however each extra worker increases output by a smaller amount

question

What curve does variable cost and total product curve take, what is the curve determining formula

answer

They follow same shape curve, determined by VC = "W"L" worklabor units

question

Formula: Marginal Cost and curve type?

answer

change in total or variable cost / change in quantity

U-shaped curve

question

In short Run Capital is Fixed, so the chg in variable cost as output increases by one unit, MC, is the change in the what and formula?

answer

Change in the cost of labor, where

MC = wage*extra labor necessary to produce one more unit of output

Chg.VC/Chg.extra.labor

question

what determines the shape of the production function in long run costs?

answer

REturns to scale

question

what determines the average cost curves and other curves?

answer

The production function

question

is the relationship between average costs and cumulative output.

answer

Learning Curve

question

–is the total number of units of output produced since the product was introduced.

answer

Cumulative output

question

–If a firm is operating in the economies of scale section of its average cost curve, expanding output lowers its cost for two reasons.

answer

1. Its average cost falls today because of economies of scale,

2. also because of learning by doing.

question

–A firm enjoys economies of scope if it is less expensive to produce goods how?

answer

jointly than separately.

question

What is the formula to determine Profit and how do you find the profit equation

answer

1. Profit = TR-TC

question

What is the formula to calculate maximizing Profits?

answer

MR=MC (where they intersect)

MR = chg in TR (TR2-TR1)/Q inputs (Q2-Q1)

MC = chg in TC (TC2-TC1)/Q inputs (Q2-Q1)

question

Find profit max; given:

TC = 120 + 2Q^2

TR = 100Q

answer

$1130

question

Given the following:

TR=20Q

TC=75+10Q+0.01𝑄2

a. Find Total Profit Equation

b. Find MR

c. Find MC

d. Find Profit Max point

E. Find Profit Earned

answer

a. What is this firm's total profit equation? Profit = TR – TC = 10Q - 75 - 0.01𝑄2

b. What is the firm's marginal revenue equation? MR= 20

c. What is the firm's marginal cost equation? MC = 10 +0.02Q

d. At what level of output is total profit maximized?

MR=MC = Q = 500.

e. How much profit is earned?

Profit = $2,425

question

What is the formula of Perfect substitute using the linear production function?

answer

(AlphaCapital) + (BetaLabor)

question

What are the two inputs used for production?

answer

1. Capital

2. Labor

question

in short run only 1 input can change and its usually what?

answer

Labor

question

If the production function is given by Q = f (z1, z2) and all inputs are multiplied by the same positive constant (t>1), then, what are the effect of output Returns to scale based on:

1. Equals or constant

2. decreasing or less than

3. increasing or greater than

answer

1. Will increase at exactly % increase

2. Will increase by less than % increase

3. will increase by greater than % increase

question

What is marginal cost?

answer

the additional cost of producing on one additional unit of output

(MC unit2 - MC unit1)

question

What is the formula of following:

1. Total cost?

2. Avg total cost

3. avg fixed cost

4. avg variable cost

5. marginal cost

6. total fixed cost

7. total variable cost

answer

1. TC = TFC + TVC

2. ATC = AFC +AVC or TC/Q

3. AFC = TFC/Q (Fixed cost is constant)

4. AVC = TVC/Q

5. MC = Chg in (TC2-TC1)/chg (Q2-Q1)

6. TFC = fixed cost is independant of production and is constant

7. TVC = TC-TFC

question

What are the profitability formulas to define following:

1. Total Revenue

2. Profit

3. Marginal Revenue

answer

1. TR = Profit * Qty

2. Profit = Total Revenue - Total cost

3. MR = chg in TR/chg Q, then (Profit - TR-TC)

question

What are the following formula's for production function:

1. Marginal Profit

2. Avg Profit

answer

1. MP = chg of Q/chg of L

2. AP = TQ/L

question

What line is the supply line in graph & what lines does it intercept with?

answer

MC and intersects with both ATC & AVC

question

At what point does MC intersect with ATC & AVC?

answer

A their respective minimal or lowest points

question

What portion of the supply curve is the MC?

answer

the portion thats above the AVC

question

What is the shutdown point?

answer

Any que below the intercept point of AVC, firms supply won't produce units below the shut down points

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