Econ Chapter 7 HW – Flashcards
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The rent for the store is an __________.
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explicit cos
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the cost for the delivery truck is an
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explicit cost
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the sacrifice $3000 in interest that the business owner gave up when he removed $100k from his bank to start the business is an
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implicit cost
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the amount spent on wages for the employees is an
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explicit cost
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the sacrificed wage that the business owner cannot earn from their old job because they have started their own full-time business is an
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implicit cost
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the difference between economic profit and accounting profit is
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-Economic profit incorporates implicit costs into the cost models when calculating profit -Accounting profit can overstate the profits if the business owner has spent a lot of money on implicit costs for the business -Accounting profit is Total Revenue - Explicit cost, while Economic profit is Economic Profit = Total Revenue - Explicit cost - Implicit cost
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fixed inputs are
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inputs that cannot be increased or decreased in a short time in order to increase or decrease output
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variable inputs are
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inputs that can be varied within a short time in order to increase or decrease output
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the mortgage on the factory is a
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fixed cost
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the money spent on wages paid to the employees is a
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fixed cost
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the payment for the input of raw materials is a
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variable cost
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Insurance for the building is a
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fixed cost
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electricity to run assembly lines is a
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variable cost
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in economics, The Short run is
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a time horizon within which output can be adjusted only by changing the amounts of variable inputs used while fixed inputs remain unchanged; at least one cost is a fixed cost.
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In econ, a firm that faces no competition is referred to as
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a monopoly
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________________________ arises where many firms are competing in a market to sell similar but differentiated products.
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Monopolistic competition
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A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.
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fixed costs; do not change
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____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
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diminishing marginal returns
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In order to determine ____________, the firm's total costs must be divided by the quantity of its output.
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average total cost
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what term is used to describe the additional cost of producing one more unit?
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marginal cost
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The term __________________ describes a situation where in the long-run, the quantity of output rises yet the average cost of production falls.
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economies of scale
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_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the price it was sold at.
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total revenue
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this includes all spending on labor, machinery, tools, and supplies purchased from other firms.
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total costs
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if a paper mill shuts down its operations for 3 months so that it produces nothing, its _________ will be reduced to zero.
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variable costs
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whatever the firm's quantity of production, ______ must exceed total costs if it is to earn a profit.
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total revenue
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Fixed costs are important because at least in the _______, the firm ________.
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short run; cannot alter them
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The long-run average total cost curve is unique because
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it allows all factors of production to change.
