Econ 2351 Exam 2 - Custom Scholars
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# Econ 2351 Exam 2

question
final goods
goods that are bought by consumers
question
intermediate goods
goods that are used to produce another good
question
short run
the period of time during which one or more inputs into production cannot be changed, in the short run a firm's capital is fixed
question
long run
the time period in which all inputs can be varied, firms cannot only change their labor inputs but also their capital
question
production function
a mathematical relationship which describes how much output can be made from different combinations of inputs: Q= f ( K , L )
question
marginal product
the additional output that a firm can produce by using an additional unit of an input (change in quantity over change in labor input)
question
diminishing marginal product
the reduction in the incremental output obtained from adding more and more labor
question
average product
total quantity of output divided by the number of units of input used to produce it:
AP= Q/L
question
cost minimization
a firm's goal of producing a specific quantity of output at minimum cost
question
isoquants
the curves representing all the combinations of inputs that allow a firm to make a particular quantity of output
question
Marginal Rate of Technical Substitution (MRTS)
the rate at which the firm can trade input X for input Y, holding output constant
question
isocost line
a curve that shows all the inout combinations that yield the same cost:
C= RK+ WL (r is price or rental rate) (w is price or wage per unit of labor)
question
returns to scale
a change in the amount of output in response to a proportional increase in all the inputs
question
constant returns to scale
a production function has this if changing the amount of capital and labor by some multiple changes the quantity of output by exactly the same multiple
question
increasing returns to scale
a production function for which changing all inputs by the same proportion changes output more than proportionately
question
decreasing returns to scale
a production function for which adjusting all inputs by the same multiple changes output by less than that multiple
question
fixed cost
an input cost that does not vary with the amount of output, even if output is zero
question
learning by doing
process by which a firm becomes more efficient at production as it produces more output
question
total factor productivity growth (technological change)
an improvement in technology that changes the firm's production function such that it gets more output from the same amount of inputs:
Q= Af ( K , L )
question
expansion path
a curve that illustrates how the optimal mix of inputs varies with total output
question
total cost curve
a curve that shows a firm's cost of producing particular quantities
question
accounting costs
direct costs of operating a business, including costs for raw materials, wages paid to workers, rent paid for office or retail space, and the like
question
economic costs
sum of a producer's accounting costs and producer's opportunity costs
question
opportunity costs
value of what a produces gives up by using an input
question
economic profit
total revenue minus economic costs
question
accounting profit
total revenue minus accounting costs
question
sunk cost
a cost that once paid and cannot be recovered
question
specific capital
capital that cannot be used outside of its original application
question
operating revenue
the money a firm earns from selling its output
question
operating costs
the costs a firm incurs in producing its output
question
sunk cost fallacy
the mistake of letting sunk costs affect forward-looking decisions
question
variable costs
costs of inputs that change as the firm changes its quantity of output
question
total cost
the sum of the fixed cost and the variable costs:
TC= FC+ VC
question
cost curve
the mathematical relationship between a firm's production costs and its output
question
Average Fixed Cost (AFC)
fixed cost per unit of output:
AFC= FC/Q
question
Average Variable Cost (AVC)
measures the per-unit variable cost of production:
AVC= VC/ Q
question
Average Total Cost (ATC)
the total cost per unit of output:
ATC= TC/ Q
ATC= AFC + AVC
question
Marginal Cost (MC)
a firm's cost of producing one more unit of output
question
short-run total cost curve
the mathematical representation of a firm's total cost of producing different quantities of output at a fixed level of capital K
question
economies of scale
total cost rises at a slower rate than output rises
question
diseconomies of scale
total cost rises at a faster rate than output rises
question
constant economies of scale
total cost rises at the same rate as output rises
question
economies of scope
when the simultaneous production of multiple products comes at a lower cost than if a firm made each product separately and then added up the costs
question
diseconomies of scope
the simultaneous production of multiple products at a higher cost than if a firm made each product separately
question
perfect competition
a market structure in which a large number of firms all produce the same product: number of firms, types of products sold, barriers to entry
question
market structure
the competitive environment in which firms operate:
categorized by number of firms, barriers to entry, and whether the consumer cares which company made the good
question
profit
total revenue minus total cost
question
marginal revenue
the additional revenue it gets from selling one additional unit of output: MR= P= MC
question
producer surplus
the amount a seller is paid for a good minus the seller's cost of providing it:
PS= TR- VC
question
free entry
the ability of a firm to enter an industry without encountering legal or technical barriers
question
long-run competitive equilibrium
the point at which the market price is equal to the minimum average total cost and firms would gain no profits by entering the industry
question
free exit
the ability of a firm to exit an industry without encountering legal or technical barriers
question
constant cost industry
an industry whose firms' total cost do not change with total industry output
question
increasing cost industry
an industry whose firms' total costs increase with increases in industry output
question
decreasing cost industry
an industry whose firms' cost levels decrease with increases in industry output
1 of 55
question
final goods
goods that are bought by consumers
question
intermediate goods
goods that are used to produce another good
question
short run
the period of time during which one or more inputs into production cannot be changed, in the short run a firm's capital is fixed
question
long run
the time period in which all inputs can be varied, firms cannot only change their labor inputs but also their capital
question
production function
a mathematical relationship which describes how much output can be made from different combinations of inputs: Q= f ( K , L )
question
marginal product
the additional output that a firm can produce by using an additional unit of an input (change in quantity over change in labor input)
question
diminishing marginal product
the reduction in the incremental output obtained from adding more and more labor
question
average product
total quantity of output divided by the number of units of input used to produce it:
AP= Q/L
question
cost minimization
a firm's goal of producing a specific quantity of output at minimum cost
question
isoquants
the curves representing all the combinations of inputs that allow a firm to make a particular quantity of output
question
Marginal Rate of Technical Substitution (MRTS)
the rate at which the firm can trade input X for input Y, holding output constant
question
isocost line
a curve that shows all the inout combinations that yield the same cost:
C= RK+ WL (r is price or rental rate) (w is price or wage per unit of labor)
question
returns to scale
a change in the amount of output in response to a proportional increase in all the inputs
question
constant returns to scale
a production function has this if changing the amount of capital and labor by some multiple changes the quantity of output by exactly the same multiple
question
increasing returns to scale
a production function for which changing all inputs by the same proportion changes output more than proportionately
question
decreasing returns to scale
a production function for which adjusting all inputs by the same multiple changes output by less than that multiple
question
fixed cost
an input cost that does not vary with the amount of output, even if output is zero
question
learning by doing
process by which a firm becomes more efficient at production as it produces more output
question
total factor productivity growth (technological change)
an improvement in technology that changes the firm's production function such that it gets more output from the same amount of inputs:
Q= Af ( K , L )
question
expansion path
a curve that illustrates how the optimal mix of inputs varies with total output
question
total cost curve
a curve that shows a firm's cost of producing particular quantities
question
accounting costs
direct costs of operating a business, including costs for raw materials, wages paid to workers, rent paid for office or retail space, and the like
question
economic costs
sum of a producer's accounting costs and producer's opportunity costs
question
opportunity costs
value of what a produces gives up by using an input
question
economic profit
total revenue minus economic costs
question
accounting profit
total revenue minus accounting costs
question
sunk cost
a cost that once paid and cannot be recovered
question
specific capital
capital that cannot be used outside of its original application
question
operating revenue
the money a firm earns from selling its output
question
operating costs
the costs a firm incurs in producing its output
question
sunk cost fallacy
the mistake of letting sunk costs affect forward-looking decisions
question
variable costs
costs of inputs that change as the firm changes its quantity of output
question
total cost
the sum of the fixed cost and the variable costs:
TC= FC+ VC
question
cost curve
the mathematical relationship between a firm's production costs and its output
question
Average Fixed Cost (AFC)
fixed cost per unit of output:
AFC= FC/Q
question
Average Variable Cost (AVC)
measures the per-unit variable cost of production:
AVC= VC/ Q
question
Average Total Cost (ATC)
the total cost per unit of output:
ATC= TC/ Q
ATC= AFC + AVC
question
Marginal Cost (MC)
a firm's cost of producing one more unit of output
question
short-run total cost curve
the mathematical representation of a firm's total cost of producing different quantities of output at a fixed level of capital K
question
economies of scale
total cost rises at a slower rate than output rises
question
diseconomies of scale
total cost rises at a faster rate than output rises
question
constant economies of scale
total cost rises at the same rate as output rises
question
economies of scope
when the simultaneous production of multiple products comes at a lower cost than if a firm made each product separately and then added up the costs
question
diseconomies of scope
the simultaneous production of multiple products at a higher cost than if a firm made each product separately
question
perfect competition
a market structure in which a large number of firms all produce the same product: number of firms, types of products sold, barriers to entry
question
market structure
the competitive environment in which firms operate:
categorized by number of firms, barriers to entry, and whether the consumer cares which company made the good
question
profit
total revenue minus total cost
question
marginal revenue
the additional revenue it gets from selling one additional unit of output: MR= P= MC
question
producer surplus
the amount a seller is paid for a good minus the seller's cost of providing it:
PS= TR- VC
question
free entry
the ability of a firm to enter an industry without encountering legal or technical barriers
question
long-run competitive equilibrium
the point at which the market price is equal to the minimum average total cost and firms would gain no profits by entering the industry
question
free exit
the ability of a firm to exit an industry without encountering legal or technical barriers
question
constant cost industry
an industry whose firms' total cost do not change with total industry output
question
increasing cost industry
an industry whose firms' total costs increase with increases in industry output
question
decreasing cost industry
an industry whose firms' cost levels decrease with increases in industry output

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