Unit 7- Assignment Essays

question

Explicit cost

answer

opportunity cost of resources employed by a firm that takes the form of cash payments

question

Implicit cost

answer

A firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

accounting profit

answer

A firm's total revenue minus its explicit costs

question

economic profit

answer

a firm's total revenue minus its explicit and implicit costs

question

Normal profit

answer

the accounting profit earned when all resources earn their opportunity cost

question

Variable Resources

answer

any resource that can be varied in the short run to increase or decrease production (labor)

question

Fixed resource

answer

any resource that cannot be varied in the short run

question

short run

answer

A period during which at least one of a firm's resources is fixed

question

Long run

answer

A period during which all resources under the firm's control are variable

question

total product

answer

total output produced by the firm

question

Production function

answer

The relationship between the amount of resources employed and a firm's total product

question

Marginal product

answer

The change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant.

question

increasing marginal returns

answer

the marginal product of a variable resource increases as each additional unit of that resource is employed

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 and could become negative

question

Fixed cost

answer

any production cost that is independent of the firm's rate of output

question

Variable cost

answer

any production cost that changes as the rate of output changes

question

Total Cost (TC)

answer

the sum of fixed costs and variable costs, or TC= FC + VC

question

Average Variable Cost (AVC)

answer

Variable cost divided by output, or AVC= VC/q

question

Average Total Cost (ATC)

answer

Total cost divided by output, or AVC= TC/q; the sum of average fixed cost and average variable cost, or ATC= AFC + AVC

question

long-run average cost curve

answer

a curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve

question

economies of scale

answer

forces that reduce a firm's average cost as the scale of operation increases in the long run

question

diseconomies of scale

answer

forces that may eventually increase a firm's average cost as the scale of operation increases in the long run [at the movies]

question

Constant Long-Run Average Cost

answer

a cost that occurs when, over some range of output, long run average cost neither increases nor decreases with changes in firm size

question

production function

answer

identifies the maximum quantities of a particular good or service that can be produced per time period with various combinations of resources, for a given level of technology

question

Isoquant Curve

answer

A curve that shows all the technologically efficient combinations of two resources, such as labor and capital, that produce a certain rate of output.

question

Properties of Isoquants:

answer

1) isoquant farther from the origin represents greater output rates
2) Isoquants have negative slides because along a given isoquant, the quantity of labor employed inversely related to the quantity of capital employed
3) Isoquants do not interact because each isoquant refers to a specific rate of output
4) isoquants are usually convex to the origin

question

Marginal Rate of Technical Substitution (MRTS)

answer

the rate at which labor substitutes for capital without affecting output

question

isocost line

answer

identifies all combinations of capital and labor the firm can hire for a given total cost

question

Expansion path

answer

the line formed by connecting tangency points

1 of 29

question

Explicit cost

answer

opportunity cost of resources employed by a firm that takes the form of cash payments

question

Implicit cost

answer

A firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

accounting profit

answer

A firm's total revenue minus its explicit costs

question

economic profit

answer

a firm's total revenue minus its explicit and implicit costs

question

Normal profit

answer

the accounting profit earned when all resources earn their opportunity cost

question

Variable Resources

answer

any resource that can be varied in the short run to increase or decrease production (labor)

question

Fixed resource

answer

any resource that cannot be varied in the short run

question

short run

answer

A period during which at least one of a firm's resources is fixed

question

Long run

answer

A period during which all resources under the firm's control are variable

question

total product

answer

total output produced by the firm

question

Production function

answer

The relationship between the amount of resources employed and a firm's total product

question

Marginal product

answer

The change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant.

question

increasing marginal returns

answer

the marginal product of a variable resource increases as each additional unit of that resource is employed

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 and could become negative

question

Fixed cost

answer

any production cost that is independent of the firm's rate of output

question

Variable cost

answer

any production cost that changes as the rate of output changes

question

Total Cost (TC)

answer

the sum of fixed costs and variable costs, or TC= FC + VC

question

Average Variable Cost (AVC)

answer

Variable cost divided by output, or AVC= VC/q

question

Average Total Cost (ATC)

answer

Total cost divided by output, or AVC= TC/q; the sum of average fixed cost and average variable cost, or ATC= AFC + AVC

question

long-run average cost curve

answer

a curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve

question

economies of scale

answer

forces that reduce a firm's average cost as the scale of operation increases in the long run

question

diseconomies of scale

answer

forces that may eventually increase a firm's average cost as the scale of operation increases in the long run [at the movies]

question

Constant Long-Run Average Cost

answer

a cost that occurs when, over some range of output, long run average cost neither increases nor decreases with changes in firm size

question

production function

answer

identifies the maximum quantities of a particular good or service that can be produced per time period with various combinations of resources, for a given level of technology

question

Isoquant Curve

answer

A curve that shows all the technologically efficient combinations of two resources, such as labor and capital, that produce a certain rate of output.

question

Properties of Isoquants:

answer

question

Marginal Rate of Technical Substitution (MRTS)

answer

the rate at which labor substitutes for capital without affecting output

question

isocost line

answer

identifies all combinations of capital and labor the firm can hire for a given total cost

question

Expansion path

answer

the line formed by connecting tangency points

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