8.2: Supply Analysis: The Firm - Custom Scholars
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8.2: Supply Analysis: The Firm

question
In terms of production in the short run, what is the one thing that is variable and what are the 2 things that are fixed?
answer

Variable: Labor

Fixed: Land and Capital

question
What is the best measure of efficiency/labor productivity?
answer
Average product
question
Where does Marginal product intersect the average product curve?
answer
From the top right at the point of maximum average product
question
Why in a perfect competition, is a firm referred to as a price taker?
answer
Because the firm faces a perfectly elastic demand curve so it does not have any impact on the market
question
Why in an imperfect competition, is a firm referred to as a price searcher?
answer
Because the demand curve is not perfectly elastic
question
What do increases to demand do to a supply curve?
answer
Shift it up
question
What is the formula for the MR curve in perfect competition and imperfect competition?
answer

Perfect Competition: MR = AR = Price

Imperfect Competition: MR = P + Q(ΔP/ΔQ) or P + Q * Slope of demand curve

question
Define total product:
answer
Maximum output a given amount of labor can produces with its fixed capital units
question
What type of expenses are the last to be trimmed if a company wants to down size, (Fixed or Variable)?
answer
Fixed
question
What are the formulas for average total cost, average fixed cost, and average variable cost (divide by TP)?
answer

Average total cost (ATC) is simply total cost (TC) divided by total product (TP).

Average fixed cost (AFC) equals TFC divided by TP.

Average variable cost (AVC) equals TVC divided by TP

question
Where are the two points on the graph when profits are maximized?
answer

When MR=MC

When MC is not falling

question
How do you know what price to charge given a graph for a perfect competition and a monopoly?
answer

You find out at what point MR = MC

You go to the Price line to see where you charge

question
Where on a graph is the breakeven point?
answer
Where AR = ATC
question
What does breakeven point imply?
answer
The firm is covering all of its economic cost
question
What are the short run and long run decisions for when TR = TC, TR = TVC but TR < TC, TR < TVC
answer

TR = TC: SR – Continue operations; LR – Continue operations

TR = TVC but TR < TC: SR – Continue operations; LR – Exit market

TR < TVC: SR and LR – Exit market

question
Look at this economies of scale graph
answer
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question
In terms of production in the short run, what is the one thing that is variable and what are the 2 things that are fixed?
answer

Variable: Labor

Fixed: Land and Capital

question
What is the best measure of efficiency/labor productivity?
answer
Average product
question
Where does Marginal product intersect the average product curve?
answer
From the top right at the point of maximum average product
question
Why in a perfect competition, is a firm referred to as a price taker?
answer
Because the firm faces a perfectly elastic demand curve so it does not have any impact on the market
question
Why in an imperfect competition, is a firm referred to as a price searcher?
answer
Because the demand curve is not perfectly elastic
question
What do increases to demand do to a supply curve?
answer
Shift it up
question
What is the formula for the MR curve in perfect competition and imperfect competition?
answer

Perfect Competition: MR = AR = Price

Imperfect Competition: MR = P + Q(ΔP/ΔQ) or P + Q * Slope of demand curve

question
Define total product:
answer
Maximum output a given amount of labor can produces with its fixed capital units
question
What type of expenses are the last to be trimmed if a company wants to down size, (Fixed or Variable)?
answer
Fixed
question
What are the formulas for average total cost, average fixed cost, and average variable cost (divide by TP)?
answer

Average total cost (ATC) is simply total cost (TC) divided by total product (TP).

Average fixed cost (AFC) equals TFC divided by TP.

Average variable cost (AVC) equals TVC divided by TP

question
Where are the two points on the graph when profits are maximized?
answer

When MR=MC

When MC is not falling

question
How do you know what price to charge given a graph for a perfect competition and a monopoly?
answer

You find out at what point MR = MC

You go to the Price line to see where you charge

question
Where on a graph is the breakeven point?
answer
Where AR = ATC
question
What does breakeven point imply?
answer
The firm is covering all of its economic cost
question
What are the short run and long run decisions for when TR = TC, TR = TVC but TR < TC, TR < TVC
answer

TR = TC: SR – Continue operations; LR – Continue operations

TR = TVC but TR < TC: SR – Continue operations; LR – Exit market

TR < TVC: SR and LR – Exit market

question
Look at this economies of scale graph
answer
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