Unit 3-AP Microeconomics - Assignment Essays

question

diminishing marginal utility

answer

reason for the negative slope of the demand-curve

question

price elasticity of demand

answer

measures how responsive consumers are to changes in price

question

accounting profit equation

answer

total revenue - explicit costs

question

accounting profit

answer

explicit (literal) costs

question

economic profit

answer

implicit (opportunity) costs

question

economic profit equation

answer

total revenue - total cost

question

Normal profit (zero economic profit)

answer

couldn't be making any more money doing anything different

question

positive economic profit

answer

best use of resources

question

negative economic profit

answer

better alternative use for resources

question

When is profit maximized?

answer

when MR=MC

question

Marginal revenue

answer

the change in total revenue from an additional unit sold

question

MR is always

answer

horizontal

question

MC rises with production because...

answer

gets more costly to produce an additional unit

question

Marginal product

answer

change in quantity/change in labor

question

Ceteris Paribus

answer

all other things held constant

question

Increasing worker productivity lowers...

answer

what it costs a firm to produce one more unit

question

Law of Diminishing Marginal Returns

answer

As more of a variable resource is added to a given amount of a fixed resource, marginal product eventually declines

question

Average Product equation

answer

total product/units of labor

question

Average product rises when

answer

Marginal product is above it

question

Average product falls when

answer

marginal product is below it

question

When does average product reach its maximum

answer

when it intersects with the MP curve

question

total product curve

answer

shows the relationship between the total amount of output produced and the number of units of an input used

question

What is the slope for total product curve

answer

Marginal product

question

Total product curve rises when

answer

Marginal product is positive

question

Total product curve falls when

answer

marginal product is negative

question

Total product curve remains constant when

answer

marginal product is zero

question

fixed costs

answer

do not vary with output

question

Spreading effect

answer

the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost

question

Average fixed cost equation

answer

total fixed cost / quantity

question

variable costs

answer

vary with output

question

average variable cost equation

answer

total variable cost/quantity

question

average variable cost falls when

answer

marginal cost is below it

question

average variable cost rises when

answer

marginal cost is above it

question

average variable cost reaches its minimum when

answer

intersects marginal cost curve

question

Total costs equation

answer

total fixed costs + total variable costs

question

when does total cost equal fixed cost?

answer

when output is zero because there is no variable cost

question

average total cost equation

answer

total cost/quantity

question

when does average total cost fall

answer

when marginal cost is below it

question

when does average total cost rise

answer

when marginal cost is above it

question

when does average total cost reach its minimum

answer

when it intersects with the marginal cost curve

question

marginal costs equation

answer

change in total costs / change in quantity

question

what happens to marginal costs at the beginning?

answer

decreases because the first few units of input produce more additional output than the units after them

question

What eventually happens to marginal costs after it decreases?

answer

increases due to law of diminishing marginal returns

question

Both production and cost structures

answer

change over time

question

short run

answer

amount of at least one input is constant

question

long run

answer

can change the amount of all inputs

question

there are no fixed costs in the

answer

long run

question

In economies of scale, when firms get bigger

answer

they can lower costs

question

Economies of scale occurs during

answer

long run average cost slopes downward

question

economies of scale can result from

answer

increasing returns of scale

question

in diseconomies of scale, firms get so big it

answer

becomes harder to coordinate production and costs start to increase

question

diseconomies of scale occur where

answer

LRAC slopes upwards

question

increasing returns to scale

answer

output increases more than increases in all inputs

question

decreasing returns to scale

answer

output increases less than increase in all inputs

question

constant returns to scale

answer

output increase to increases in all inputs

question

productive efficiency

answer

profit= minimum average total cost

question

allocative efficiency

answer

profit= marginal cost

question

how many sellers are in perfect competition

answer

many

question

how are the products in perfect competition

answer

identical

question

how are the entries and exits in market in perfect competition

answer

free

question

marginal revenue formula

answer

change in total revenue / change in quantity

question

average revenue formula

answer

total revenue/quantity

question

how is demand in perfect competition

answer

perfectly elastic

question

if average total cost is below MR+D

answer

firm produces profit

question

if average total cost is above MR+D

answer

firm produces loss

question

profit formula

answer

total revene- total cost

question

loss formula

answer

total cost > total revenue

question

total profit is positive when

answer

p > atc

question

total profit is negative when

answer

p>atc

question

total profit is zero when

answer

p=atc

question

in the short run, decision to shut down depends on

answer

whether or not profit exceeds average VARIABLE cost

question

in the long run, decision to shut down depends on

answer

whether or not profit exceeds average TOTAL cost

question

when profit>average total cost

answer

firm is making economic profits

question

when average variable cost<profit<average total cost

answer

firm is incurring economic losses but will stay open

question

when profit< average variable cost

answer

firm shuts down because it can't cover variable costs

question

constant cost industry

answer

does not experience changes in production costs

question

how is the constant cost industry line

answer

horizontal sloping long run supply curve

question

increasing cost industry

answer

experiences increases in average production costs

question

when is increasing cost industry most likely to occur

answer

in large industries where input prices increase with higher demand

question

decreasing cost industry

answer

experiences decreases in average production costs

question

when is decreasing cost industry most likely to occur

answer

in industries where production is only possible at a mass level

question

how is the curve in decreasing cost industry

answer

downward sloping long run supply curve

question

Which kind of profit is just enough to keep a firm operating in the long run?

answer

normal

question

a fixed input does not change with

answer

the output level in the short run

question

diminishing marginal returns always involve

answer

a fixed input

question

marginal cost rises due to

answer

diminishing marginal returns

question

the relationship between the marginal cost curve and the average cost curve is that when

answer

marginal cost is above average cost, average cost must be rising

question

In the short run, what happens to average fixed cost as output increases?

answer

falls continuously

question

if labor is the only variable input and the wage rate is constant, marginal COST reaches its minimum when

answer

marginal PRODUCT reaches its maximum

question

the spreading effect causes the average total cost curvet

answer

fall, while the diminishing returns effect causes it to rise

question

if marginal cost is rising and lies above average variable cost, then average total cost

answer

may be rising or falling

question

when a firm makes a production deacons, sunk costs should be

answer

ignored

question

monopolistically competitive industries are characterized by

answer

differentiated products, many firms and high barriers to entry

question

compared to a monopolistically competitive industry, an oligopoly has

answer

a higher herfindahl-hirschman index, fewer firms and fewer barriers to entry

question

diseconomies of scale can be caused by

answer

communication problems

1 of 95

question

diminishing marginal utility

answer

reason for the negative slope of the demand-curve

question

price elasticity of demand

answer

measures how responsive consumers are to changes in price

question

accounting profit equation

answer

total revenue - explicit costs

question

accounting profit

answer

explicit (literal) costs

question

economic profit

answer

implicit (opportunity) costs

question

economic profit equation

answer

total revenue - total cost

question

Normal profit (zero economic profit)

answer

couldn't be making any more money doing anything different

question

positive economic profit

answer

best use of resources

question

negative economic profit

answer

better alternative use for resources

question

When is profit maximized?

answer

when MR=MC

question

Marginal revenue

answer

the change in total revenue from an additional unit sold

question

MR is always

answer

horizontal

question

MC rises with production because...

answer

gets more costly to produce an additional unit

question

Marginal product

answer

change in quantity/change in labor

question

Ceteris Paribus

answer

all other things held constant

question

Increasing worker productivity lowers...

answer

what it costs a firm to produce one more unit

question

Law of Diminishing Marginal Returns

answer

As more of a variable resource is added to a given amount of a fixed resource, marginal product eventually declines

question

Average Product equation

answer

total product/units of labor

question

Average product rises when

answer

Marginal product is above it

question

Average product falls when

answer

marginal product is below it

question

When does average product reach its maximum

answer

when it intersects with the MP curve

question

total product curve

answer

shows the relationship between the total amount of output produced and the number of units of an input used

question

What is the slope for total product curve

answer

Marginal product

question

Total product curve rises when

answer

Marginal product is positive

question

Total product curve falls when

answer

marginal product is negative

question

Total product curve remains constant when

answer

marginal product is zero

question

fixed costs

answer

do not vary with output

question

Spreading effect

answer

the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost

question

Average fixed cost equation

answer

total fixed cost / quantity

question

variable costs

answer

vary with output

question

average variable cost equation

answer

total variable cost/quantity

question

average variable cost falls when

answer

marginal cost is below it

question

average variable cost rises when

answer

marginal cost is above it

question

average variable cost reaches its minimum when

answer

intersects marginal cost curve

question

Total costs equation

answer

total fixed costs + total variable costs

question

when does total cost equal fixed cost?

answer

when output is zero because there is no variable cost

question

average total cost equation

answer

total cost/quantity

question

when does average total cost fall

answer

when marginal cost is below it

question

when does average total cost rise

answer

when marginal cost is above it

question

when does average total cost reach its minimum

answer

when it intersects with the marginal cost curve

question

marginal costs equation

answer

change in total costs / change in quantity

question

what happens to marginal costs at the beginning?

answer

decreases because the first few units of input produce more additional output than the units after them

question

What eventually happens to marginal costs after it decreases?

answer

increases due to law of diminishing marginal returns

question

Both production and cost structures

answer

change over time

question

short run

answer

amount of at least one input is constant

question

long run

answer

can change the amount of all inputs

question

there are no fixed costs in the

answer

long run

question

In economies of scale, when firms get bigger

answer

they can lower costs

question

Economies of scale occurs during

answer

long run average cost slopes downward

question

economies of scale can result from

answer

increasing returns of scale

question

in diseconomies of scale, firms get so big it

answer

becomes harder to coordinate production and costs start to increase

question

diseconomies of scale occur where

answer

LRAC slopes upwards

question

increasing returns to scale

answer

output increases more than increases in all inputs

question

decreasing returns to scale

answer

output increases less than increase in all inputs

question

constant returns to scale

answer

output increase to increases in all inputs

question

productive efficiency

answer

profit= minimum average total cost

question

allocative efficiency

answer

profit= marginal cost

question

how many sellers are in perfect competition

answer

many

question

how are the products in perfect competition

answer

identical

question

how are the entries and exits in market in perfect competition

answer

free

question

marginal revenue formula

answer

change in total revenue / change in quantity

question

average revenue formula

answer

total revenue/quantity

question

how is demand in perfect competition

answer

perfectly elastic

question

if average total cost is below MR+D

answer

firm produces profit

question

if average total cost is above MR+D

answer

firm produces loss

question

profit formula

answer

total revene- total cost

question

loss formula

answer

total cost > total revenue

question

total profit is positive when

answer

p > atc

question

total profit is negative when

answer

p>atc

question

total profit is zero when

answer

p=atc

question

in the short run, decision to shut down depends on

answer

whether or not profit exceeds average VARIABLE cost

question

in the long run, decision to shut down depends on

answer

whether or not profit exceeds average TOTAL cost

question

when profit>average total cost

answer

firm is making economic profits

question

when average variable cost<profit<average total cost

answer

firm is incurring economic losses but will stay open

question

when profit< average variable cost

answer

firm shuts down because it can't cover variable costs

question

constant cost industry

answer

does not experience changes in production costs

question

how is the constant cost industry line

answer

horizontal sloping long run supply curve

question

increasing cost industry

answer

experiences increases in average production costs

question

when is increasing cost industry most likely to occur

answer

in large industries where input prices increase with higher demand

question

decreasing cost industry

answer

experiences decreases in average production costs

question

when is decreasing cost industry most likely to occur

answer

in industries where production is only possible at a mass level

question

how is the curve in decreasing cost industry

answer

downward sloping long run supply curve

question

Which kind of profit is just enough to keep a firm operating in the long run?

answer

normal

question

a fixed input does not change with

answer

the output level in the short run

question

diminishing marginal returns always involve

answer

a fixed input

question

marginal cost rises due to

answer

diminishing marginal returns

question

the relationship between the marginal cost curve and the average cost curve is that when

answer

marginal cost is above average cost, average cost must be rising

question

In the short run, what happens to average fixed cost as output increases?

answer

falls continuously

question

if labor is the only variable input and the wage rate is constant, marginal COST reaches its minimum when

answer

marginal PRODUCT reaches its maximum

question

the spreading effect causes the average total cost curvet

answer

fall, while the diminishing returns effect causes it to rise

question

if marginal cost is rising and lies above average variable cost, then average total cost

answer

may be rising or falling

question

when a firm makes a production deacons, sunk costs should be

answer

ignored

question

monopolistically competitive industries are characterized by

answer

differentiated products, many firms and high barriers to entry

question

compared to a monopolistically competitive industry, an oligopoly has

answer

a higher herfindahl-hirschman index, fewer firms and fewer barriers to entry

question

diseconomies of scale can be caused by

answer

communication problems

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