Unit 3 - Assignment Essays

question

Economic Cost

answer

The payment that must be made to obtain and retain the services of a resource

question

explicit costs

answer

Monetary payments, or cash expenditures

-Payments to those who supply labor services, materials, etc.

-Payments for use of resources owned by others

question

implicit costs

answer

Opportunity cost of using self-owned, self-employed resources

Money payments that self-employed resources could have earned in best alternative use.

question

normal profit

answer

payment made for entrepreneurial talent or ability

Implicit cost

Cost of doing business

(what you pay yourself)

question

accounting profit

answer

total revenue - explicit costs

implicit costs = Econ. Profit

question

economic profit

answer

total revenue - explicit costs - implicit costs

also known as pure profit

question

if economic profit = 0

answer

entrepreneur covered all explicit and implicit costs, including normal profit.

Entrepreneur made a salary.

question

if accounting profit = 0

answer

entrepreneur did not make a salary.

question

fixed costs

answer

Costs that do not vary with output

question

variable cost (TVC)

answer

Costs that do vary with output

question

Total cost (TC)

answer

Sum of TFC and TVC

TC = TFC + TVC

question

marginal cost

answer

Additional cost of one additional output

question

Average fixed cost equation

answer

AFC = TFC/Q

question

Average Variable Cost equation

answer

AVC= TVC/Q

question

Average total cost equation

answer

ATC= TC/Q

question

Marginal Cost equation

answer

MC = ΔTC/ΔQ

question

Law of diminishing marginal returns

answer

As successive units of a variable resource (labor) are added to a fixed resource (capital), beyond some point the extra or marginal product that can be attributed to each additional unit of the variable resource will decline.

Ex: adding more workers(variable) to a factory (fixed)

Things like overcrowding may take place, reducing the output (MP)

question

MP and AP curves

answer

When all inputs change by the same proportion and output changes by that same proportion, there are constant returns to scale.

question

MC, ATC, AVC AFC

answer

marginal product must be positive and decreasing

question

Assume a firm doubles its usage of each input, resulting in a doubling of the firm’s output. Which of the following describes this result?

answer

Marginal product is equal to 0

question

Given a short-run production function, which of the following is true when total product is increasing at a decreasing rate?

answer

Average fixed cost is decreasing, and both average variable cost and average total cost are increasing.

question

Which of the following is true when total product is at its maximum?

answer

Economies of scale refers to the relationship between long-run average total cost and the size of the firm. Increasing returns to scale refers to the relationship between inputs and output.

question

At a firm’s current output level, average fixed cost is $10, average variable cost is $30, average total cost is $40, and marginal cost is $55. Which of the following must be true?

answer

perfect competition occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices

question

Which of the following is true about economies of scale and increasing returns to scale?

answer

Continue to produce at its current level of output to minimize losses.

question

perfect competition

answer

When all inputs change by the same proportion and output changes by that same proportion, there are constant returns to scale.

question

At its current level of output, a firm’s total revenue is greater than its total variable cost but less than its total cost. If the firm is producing at the point where marginal revenue is equal to marginal cost, what should the firm do to maximize profit in the short run?

answer

The competitive firm should continue to produce up to the output level where price, which is equal to marginal revenue (MR)(MR) for a competitive firm, equals marginal cost (MC)(MC). If PP and MRMR exceed MCMC, then there are units of output that the firm is not producing that would be profitable.

question

Assume a firm doubles its usage of each input, resulting in a doubling of the firm’s output. Which of the following describes this result?

answer

As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

The law of diminishing returns states that as more of a variable input is added to a fixed input, output eventually increases at a decreasing rate. This is a short-run concept using one variable input and at least one fixed input.

question

Assume a competitive firm is producing where price (P)(P) and marginal revenue (MR)(MR) are greater than marginal cost (MC)(MC) and average variable cost (AVC)(AVC). Which of the following is true regarding the firm’s short-run output level?

answer

total product is maximized when marginal product is zero.

question

Which of the following provides an example of the law of diminishing returns?

answer

If accounting profits are less than opportunity costs, there will be economic losses.

question

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?

answer

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question

Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?

answer

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1 of 31

question

Economic Cost

answer

The payment that must be made to obtain and retain the services of a resource

question

explicit costs

answer

Monetary payments, or cash expenditures

-Payments to those who supply labor services, materials, etc.

-Payments for use of resources owned by others

question

implicit costs

answer

Opportunity cost of using self-owned, self-employed resources

Money payments that self-employed resources could have earned in best alternative use.

question

normal profit

answer

payment made for entrepreneurial talent or ability

Implicit cost

Cost of doing business

(what you pay yourself)

question

accounting profit

answer

total revenue - explicit costs

implicit costs = Econ. Profit

question

economic profit

answer

total revenue - explicit costs - implicit costs

also known as pure profit

question

if economic profit = 0

answer

entrepreneur covered all explicit and implicit costs, including normal profit.

Entrepreneur made a salary.

question

if accounting profit = 0

answer

entrepreneur did not make a salary.

question

fixed costs

answer

Costs that do not vary with output

question

variable cost (TVC)

answer

Costs that do vary with output

question

Total cost (TC)

answer

Sum of TFC and TVC

TC = TFC + TVC

question

marginal cost

answer

Additional cost of one additional output

question

Average fixed cost equation

answer

AFC = TFC/Q

question

Average Variable Cost equation

answer

AVC= TVC/Q

question

Average total cost equation

answer

ATC= TC/Q

question

Marginal Cost equation

answer

MC = ΔTC/ΔQ

question

Law of diminishing marginal returns

answer

Ex: adding more workers(variable) to a factory (fixed)

Things like overcrowding may take place, reducing the output (MP)

question

MP and AP curves

answer

When all inputs change by the same proportion and output changes by that same proportion, there are constant returns to scale.

question

MC, ATC, AVC AFC

answer

marginal product must be positive and decreasing

question

Assume a firm doubles its usage of each input, resulting in a doubling of the firm’s output. Which of the following describes this result?

answer

Marginal product is equal to 0

question

Given a short-run production function, which of the following is true when total product is increasing at a decreasing rate?

answer

Average fixed cost is decreasing, and both average variable cost and average total cost are increasing.

question

Which of the following is true when total product is at its maximum?

answer

Economies of scale refers to the relationship between long-run average total cost and the size of the firm. Increasing returns to scale refers to the relationship between inputs and output.

question

At a firm’s current output level, average fixed cost is $10, average variable cost is $30, average total cost is $40, and marginal cost is $55. Which of the following must be true?

answer

question

Which of the following is true about economies of scale and increasing returns to scale?

answer

Continue to produce at its current level of output to minimize losses.

question

perfect competition

answer

When all inputs change by the same proportion and output changes by that same proportion, there are constant returns to scale.

question

answer

question

Assume a firm doubles its usage of each input, resulting in a doubling of the firm’s output. Which of the following describes this result?

answer

As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

question

answer

total product is maximized when marginal product is zero.

question

Which of the following provides an example of the law of diminishing returns?

answer

If accounting profits are less than opportunity costs, there will be economic losses.

question

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?

answer

undefined

question

Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?

answer

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