Chapter 9 Intro to Microeconomics – Flashcards
Unlock all answers in this set
Unlock answersquestion
economic costs
answer
the payment that must be made to obtain and retain the services of a resource
question
explicit costs
answer
monetary outlay
question
implicit cost
answer
opportunity cost of using self-owned resources, also includes a normal profit
question
accounting profit
answer
total revenue-explicit costs
question
economic profit
answer
accounting profit-implicit costs
question
short run
answer
includes some variable inputs with a fixed plant
question
long run
answer
all inputs are variables, firms can adjust plant size as well as enter and exit industry
question
marginal product
answer
change in total product/change in labor input
question
average product
answer
total product/units of labor
question
normal profit
answer
the return to the entrepreneur and is the amount of money required by the entrepreneur to stay in that market
question
law of diminishing returns
answer
as sucessiva increments of a variable resource are added to a fixed resource, the marginal product of the variable resource will decrease
question
fixed costs
answer
costs that do not vary with output
question
variable costs
answer
costs that do vary with output
question
total cost
answer
fixed cost+variable cost
question
average fixed cost
answer
TFC/Q
question
average variable cost
answer
TVC/Q
question
average total cost
answer
TC/Q
question
marginal cost
answer
change in total cost/change in quantity
question
economies of scale
answer
refers to the idea that, for a time, larger plant sizes will lead to lower unit costs labor specialization- makes us of special skills managerial specialization- managers can manage more workers with no increased cost efficient capital- high volume production warrants the expensive large scale equipment
question
diseconomies of scale
answer
occur if a firm becomes too large. as the firm expands over time, the expansion may lead to higher average total costs
question
minimum efficient scale
answer
lowest level of output at which long run average costs are minimized. this can determine the structure of the industry
question
natural monopoly
answer
rare situation where economies of scale extend beyond the market size
question
Explicit costs are payments the firm makes for
answer
inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self owned resources such as foregone income
question
The explicit costs of going to college include
answer
tuition costs and the cost of books, whereas the implicit costs include foregone income
question
A normal profit is considered a cost because
answer
this is the amount required to ensure continued supply of the product
question
Which of the following statements is true regarding the costs associated with owning and operating an automobile?
answer
Fixed costs include insurance and variable costs include gasoline
question
You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. In making your decision you should consider
answer
the variable cost of the trip, the opportunity cost of time, and the need for transportation in Florida
question
Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda's accounting profit is _____________ while her economic profit is ______________.
answer
$300; negative $100
question
True or false. The U shape of the long-run ATC curve is the result of diminishing returns.
answer
false
