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How a firm's production increases as it adds more labor

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A production function shows______________________

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An increase in the amount of physical capital per worker

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Labor productivity will increase in response to ___________________

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Using the fewest resources to produce a good or service

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When a firm produces at a technically efficient output level, it is _______________________

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Marginal physical product

answer

The change in total output associated with one additional unit of input

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A firm increases the amount of a variable input without changing a fixed input

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Diminishing returns occur because

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Total Cost

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The sum of fixed cost and the variable cost at any rate

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Is the change in total cost from producing one additional unit of output

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Marginal cost

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Fixed costs

answer

In the short run,when a firm produces zero output, total cost equals ______________.

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Property taxes

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a fixed cost

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Variable Cost

answer

At any given rate of output, the difference between total cost and fixed cost

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Labor and raw materials costs

answer

In the short run, ________and _____________ is mostly a variable cost

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The effect of diminishing returns

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The average variable cost curve slopes upward with a higher rate of output in the short run because of

question

Marginal cost is less than average total cost

answer

The average total cost (ATC) curve will be negatively sloped as long as

question

Are the sum of actual monetary payments made for resources used to produce a good

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Explicit costs

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Includes both implicit and explicit costs

answer

Economic cost

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Accounting cost are always less than or equal to economic costs

answer

The relationship between economic costs and accounting costs

question

Lowest average total cost for producing each level of output

answer

The long-run average total cost curve is constructed from the_____________

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Total cost that result from using operations of larger size

answer

Economic of scale are reductions in average

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The upward-sloping segment of the long run average total cost curve

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Diseconomies of scale are reflected in_______________

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Economic cost include the opportunity costs of all resources used, while accounting costs include actual dollar outlays

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Accounting cost and economic costs differ because

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Total revenues and total economic cost

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Economic profit is the difference between

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Covers the full opportunity cost of the resources used by the firm

answer

Normal profit

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Can result in economic losses

answer

Entrepreneurship

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There is only one producer of a good or service

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A monopoly occurs when______________

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Has power market

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When a producer can control the market price for the good it sells, the producer_______________.

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Is a price taker

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A competitive firm

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Horizontal

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The demand curve for each perfectly competitive firm is _______________.

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Whether the firm should shut down or produce

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A production decision

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Decides what level of output will maximize profits

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In making a production decision, an entrepreneur__________.

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Product price is constant at all levels of output

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The fact that a perfectly competitive firm's total revenue curve is an upward-sloping straight line implies that

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In which some costs are fixed

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The short run is the time period

question

Marginal cost

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Represents the change in total cost that results from a one-unit increase in production

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Each unit produced will cost incrementally more

answer

If diminishing returns exit, then_________.

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Is equal to marginal cost

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For perfectly competitive firms, price

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price equals marginal cost

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A perfectly competitive firm will maximize profits by choosing an output level where

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Can increase its profit by decreasing output

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If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

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MR greater than AVC

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A competitive firm should always continue to operate in the short run as long as

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Produce at the rate of output where MR equals MC

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When price exceeds average variable cost but not average total cost, the firm should, in the short run,

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Investment decision

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the decision to start or expand a business

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Treat all cost as variable

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In making an investment decision, an entrepreneur

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payroll taxes

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A change in______________will change the optimal rate of output

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A change in property taxes

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Affects both the marginal and average total cost curves of a firm in the short run

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The number of firms in the market

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_______________ is the determinant of market supply but not the supply curve of an individual firm

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Long-run average total cost

answer

Investment decisions are made on the basic of the relationship of price to

question

Zero economic profit in the long run, perfect information, and homogeneous products

answer

characteristics of a perfectly competitive market

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Additional firms will enter the market

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If economic profits are earned in a competitive market, then over time

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Cause existing firms to expand production

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In a competitive market, economic profits will

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Shifts to the right

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Other things being equal, as more firms enter a market, the market supply curve

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Patents, government regulation, control of essential factors of production,and economies of scale

answer

Barriers to entry

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Supplied at each price by each supplier are added together

answer

To determine the market supply, the quantities...

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Price equals marginal cost

answer

To maximize profits, a competitive firm will seek to expand output until

question

Price minus average total cost

answer

Profit per unit is equal to

question

Maximize total profit

answer

A profit-maximizing producer seeks to

question

P= MR, P=MC, and P= minimum ATC

answer

For a perfectly competitive market, long-run equilibrium is characterized by

question

Minimum average total cost, economic profit is zero

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In a perfectly competitive market, when is price equal to

question

P>long-run ATC

answer

A firm would enter a market

question

P= long-run ATC

answer

Case would entry and exit cease

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P< long-run ATC

answer

A firm would exit from a market

question

Existing firms to produce more output

answer

Technological improvements cause

question

An increase in marginal revenue

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Is least likely to occur during the long run in a perfectly competitive market experiencing economic profits

question

There is currently no better way to use society's scare resources

answer

when firms in a competitive market are experiencing zero economic profits, this is an indication that

question

That they aren't using resources in the best way

answer

Economic losses are a signal to producers

question

Price is driven down to minimum ATC

answer

A perfectly competitive market results in efficiency because

question

A reallocation of resources to better uses

answer

In a perfectly competitive market economy, business failures can benefit society by causing

question

The cost of producing the additional 200 soccer balls is greater than the amount that consumers are willing to pay for the additional soccer balls

answer

Bib's soccer Ball Company produces 800 soccer balls per week. If the firm used marginal cost pricing to determine soccer ball output, it would produce 600 soccer balls. Consumers don't recieve the most desirable quantity of soccer balls for Bib's because

question

Consumers would like more scarce resources devoted to the production of this product

answer

When economic profits exist in the market for a particular product, this is a signal to producers that

question

Little because society would be willing to give up more alternative goods in order to get additional shoes

answer

When an athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too

question

the ability to alter the market price of a product

answer

Market power

question

Makers, but competitive firms are price takers

answer

Monopolists are price

question

Face downward-sloping market demand curves

answer

Both a competitive industry and a monopoly

question

Is positive up to the rate of output that maximizes total revenue

answer

The marginal revenue of a monopolist

question

At the output where marginal revenue equals marginal cost

answer

Monopolists set prices

question

MR = MC and determines price based on the demand curve

answer

A profit-maximizing monopolist produces the rate of output where

question

Reducing production and pushing prices up

answer

A monopoly realizes larger profits than a comparable competitive market by

question

Control over key inputs, government-bestowed franchised rights, and a downward-sloping demand curve for its product

answer

A monopoly can have a high degree market power because of

question

Barriers to entry and long-run economic profits are low

answer

Contestable market

Econ 203 test 3 – Flashcards

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