Principles of Microeconomics Ch 13

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Posted on

March 14th, 2023

question

Profit

answer

total revenue - total cost

question

Explicit Costs (EC)

answer

costs requiring money to be spent e.g. wages

question

Implicit Costs (IC)

answer

costs that do not require money e.g. opportunity cost

question

Total cost (TC)

answer

explicit costs + implicit costs

question

Accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue - total cost

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good, gets flatter as production rises

question

Marginal product of labor (MPL)

answer

the change in output from hiring one additional unit of labor

question

diminishing marginal product

answer

when the marginal product of an input falls as the quantity of the input rises

question

Marginal Cost (MC)

answer

the increase in total cost for producing one more unit of a good , rises with increase of output

question

Marginal cost curve

answer

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

question

Fixed Cost (FC)

answer

expenses that do not change with the quantity of a product output

question

Variable Cost (VC)

answer

cost that varies with the quantity produced

question

Total Cost (TC)

answer

FC + VC

question

Total cost curve

answer

shows how total cost depends on the quantity of output

question

Average Fixed Cost (AFC)

answer

Fixed costs divided by the number of units of output.

question

AFC curve

answer

downward sloping

question

Average Variable Cost (AVC)

answer

total variable costs divided by quantity of output

question

AVC curve

answer

U-shaped

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output, or sum of average fixed and variable costs

question

ATC curve

answer

U-shaped

question

Relationship between ATC and MC

answer

When MC < ATC, ATC is falling. When MC > ATC, ATC is rising. The MC curve crosses the ATC curve at the ATC curve's minimum.

question

Short run costs

answer

some inputs are fixed, the costs of these inputs are fixed costs

question

Long Run Costs

answer

all costs are variable, no fixed costs ATC at any inteval is cost per unit

question

ATC curves over time

answer

ATC falls as Q increases

question

Economies of scale

answer

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

question

constant returns to scale

answer

ATC rises as Q increases, usually when Q is high / miscoordination in a large firm

question

diseconomies of scale

answer

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question

Profit

answer

total revenue - total cost

question

Explicit Costs (EC)

answer

costs requiring money to be spent e.g. wages

question

Implicit Costs (IC)

answer

costs that do not require money e.g. opportunity cost

question

Total cost (TC)

answer

explicit costs + implicit costs

question

Accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue - total cost

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good, gets flatter as production rises

question

Marginal product of labor (MPL)

answer

the change in output from hiring one additional unit of labor

question

diminishing marginal product

answer

when the marginal product of an input falls as the quantity of the input rises

question

Marginal Cost (MC)

answer

the increase in total cost for producing one more unit of a good , rises with increase of output

question

Marginal cost curve

answer

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

question

Fixed Cost (FC)

answer

expenses that do not change with the quantity of a product output

question

Variable Cost (VC)

answer

cost that varies with the quantity produced

question

Total Cost (TC)

answer

FC + VC

question

Total cost curve

answer

shows how total cost depends on the quantity of output

question

Average Fixed Cost (AFC)

answer

Fixed costs divided by the number of units of output.

question

AFC curve

answer

downward sloping

question

Average Variable Cost (AVC)

answer

total variable costs divided by quantity of output

question

AVC curve

answer

U-shaped

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output, or sum of average fixed and variable costs

question

ATC curve

answer

U-shaped

question

Relationship between ATC and MC

answer

When MC < ATC, ATC is falling. When MC > ATC, ATC is rising. The MC curve crosses the ATC curve at the ATC curve's minimum.

question

Short run costs

answer

some inputs are fixed, the costs of these inputs are fixed costs

question

Long Run Costs

answer

all costs are variable, no fixed costs ATC at any inteval is cost per unit

question

ATC curves over time

answer

ATC falls as Q increases

question

Economies of scale

answer

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

question

constant returns to scale

answer

ATC rises as Q increases, usually when Q is high / miscoordination in a large firm

question

diseconomies of scale

answer

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