Econ 2351 Exam 2

question

final goods

answer

goods that are bought by consumers

question

intermediate goods

answer

goods that are used to produce another good

question

short run

answer

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

answer

the time period in which all inputs can be varied, firms cannot only change their labor inputs but also their capital

question

production function

answer

a mathematical relationship which describes how much output can be made from different combinations of inputs: Q= f ( K , L )

question

marginal product

answer

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

answer

the reduction in the incremental output obtained from adding more and more labor

question

average product

answer

total quantity of output divided by the number of units of input used to produce it:
AP= Q/L

question

cost minimization

answer

a firm's goal of producing a specific quantity of output at minimum cost

question

isoquants

answer

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)

answer

the rate at which the firm can trade input X for input Y, holding output constant

question

isocost line

answer

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

answer

a change in the amount of output in response to a proportional increase in all the inputs

question

constant returns to scale

answer

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

answer

a production function for which changing all inputs by the same proportion changes output more than proportionately

question

decreasing returns to scale

answer

a production function for which adjusting all inputs by the same multiple changes output by less than that multiple

question

fixed cost

answer

an input cost that does not vary with the amount of output, even if output is zero

question

learning by doing

answer

process by which a firm becomes more efficient at production as it produces more output

question

total factor productivity growth (technological change)

answer

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

answer

a curve that illustrates how the optimal mix of inputs varies with total output

question

total cost curve

answer

a curve that shows a firm's cost of producing particular quantities

question

accounting costs

answer

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

answer

sum of a producer's accounting costs and producer's opportunity costs

question

opportunity costs

answer

value of what a produces gives up by using an input

question

economic profit

answer

total revenue minus economic costs

question

accounting profit

answer

total revenue minus accounting costs

question

sunk cost

answer

a cost that once paid and cannot be recovered

question

specific capital

answer

capital that cannot be used outside of its original application

question

operating revenue

answer

the money a firm earns from selling its output

question

operating costs

answer

the costs a firm incurs in producing its output

question

sunk cost fallacy

answer

the mistake of letting sunk costs affect forward-looking decisions

question

variable costs

answer

costs of inputs that change as the firm changes its quantity of output

question

total cost

answer

the sum of the fixed cost and the variable costs:
TC= FC+ VC

question

cost curve

answer

the mathematical relationship between a firm's production costs and its output

question

Average Fixed Cost (AFC)

answer

fixed cost per unit of output:
AFC= FC/Q

question

Average Variable Cost (AVC)

answer

measures the per-unit variable cost of production:
AVC= VC/ Q

question

Average Total Cost (ATC)

answer

the total cost per unit of output:
ATC= TC/ Q
ATC= AFC + AVC

question

Marginal Cost (MC)

answer

a firm's cost of producing one more unit of output

question

short-run total cost curve

answer

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

answer

total cost rises at a slower rate than output rises

question

diseconomies of scale

answer

total cost rises at a faster rate than output rises

question

constant economies of scale

answer

total cost rises at the same rate as output rises

question

economies of scope

answer

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

answer

the simultaneous production of multiple products at a higher cost than if a firm made each product separately

question

perfect competition

answer

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

answer

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

answer

total revenue minus total cost

question

marginal revenue

answer

the additional revenue it gets from selling one additional unit of output: MR= P= MC

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it:
PS= TR- VC

question

free entry

answer

the ability of a firm to enter an industry without encountering legal or technical barriers

question

long-run competitive equilibrium

answer

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

answer

the ability of a firm to exit an industry without encountering legal or technical barriers

question

constant cost industry

answer

an industry whose firms' total cost do not change with total industry output

question

increasing cost industry

answer

an industry whose firms' total costs increase with increases in industry output

question

decreasing cost industry

answer

an industry whose firms' cost levels decrease with increases in industry output

1 of 55

question

final goods

answer

goods that are bought by consumers

question

intermediate goods

answer

goods that are used to produce another good

question

short run

answer

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

answer

the time period in which all inputs can be varied, firms cannot only change their labor inputs but also their capital

question

production function

answer

a mathematical relationship which describes how much output can be made from different combinations of inputs: Q= f ( K , L )

question

marginal product

answer

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

answer

the reduction in the incremental output obtained from adding more and more labor

question

average product

answer

total quantity of output divided by the number of units of input used to produce it:
AP= Q/L

question

cost minimization

answer

a firm's goal of producing a specific quantity of output at minimum cost

question

isoquants

answer

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)

answer

the rate at which the firm can trade input X for input Y, holding output constant

question

isocost line

answer

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

answer

a change in the amount of output in response to a proportional increase in all the inputs

question

constant returns to scale

answer

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

answer

a production function for which changing all inputs by the same proportion changes output more than proportionately

question

decreasing returns to scale

answer

a production function for which adjusting all inputs by the same multiple changes output by less than that multiple

question

fixed cost

answer

an input cost that does not vary with the amount of output, even if output is zero

question

learning by doing

answer

process by which a firm becomes more efficient at production as it produces more output

question

total factor productivity growth (technological change)

answer

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

answer

a curve that illustrates how the optimal mix of inputs varies with total output

question

total cost curve

answer

a curve that shows a firm's cost of producing particular quantities

question

accounting costs

answer

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

answer

sum of a producer's accounting costs and producer's opportunity costs

question

opportunity costs

answer

value of what a produces gives up by using an input

question

economic profit

answer

total revenue minus economic costs

question

accounting profit

answer

total revenue minus accounting costs

question

sunk cost

answer

a cost that once paid and cannot be recovered

question

specific capital

answer

capital that cannot be used outside of its original application

question

operating revenue

answer

the money a firm earns from selling its output

question

operating costs

answer

the costs a firm incurs in producing its output

question

sunk cost fallacy

answer

the mistake of letting sunk costs affect forward-looking decisions

question

variable costs

answer

costs of inputs that change as the firm changes its quantity of output

question

total cost

answer

the sum of the fixed cost and the variable costs:
TC= FC+ VC

question

cost curve

answer

the mathematical relationship between a firm's production costs and its output

question

Average Fixed Cost (AFC)

answer

fixed cost per unit of output:
AFC= FC/Q

question

Average Variable Cost (AVC)

answer

measures the per-unit variable cost of production:
AVC= VC/ Q

question

Average Total Cost (ATC)

answer

the total cost per unit of output:
ATC= TC/ Q
ATC= AFC + AVC

question

Marginal Cost (MC)

answer

a firm's cost of producing one more unit of output

question

short-run total cost curve

answer

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

answer

total cost rises at a slower rate than output rises

question

diseconomies of scale

answer

total cost rises at a faster rate than output rises

question

constant economies of scale

answer

total cost rises at the same rate as output rises

question

economies of scope

answer

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

answer

the simultaneous production of multiple products at a higher cost than if a firm made each product separately

question

perfect competition

answer

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

answer

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

answer

total revenue minus total cost

question

marginal revenue

answer

the additional revenue it gets from selling one additional unit of output: MR= P= MC

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it:
PS= TR- VC

question

free entry

answer

the ability of a firm to enter an industry without encountering legal or technical barriers

question

long-run competitive equilibrium

answer

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

answer

the ability of a firm to exit an industry without encountering legal or technical barriers

question

constant cost industry

answer

an industry whose firms' total cost do not change with total industry output

question

increasing cost industry

answer

an industry whose firms' total costs increase with increases in industry output

question

decreasing cost industry

answer

an industry whose firms' cost levels decrease with increases in industry output

Continue to order Get a quote

Econ 2351 Exam 2

Recent Posts

Recent Comments

Calculate the price of your order

Our guarantees

Money-back guarantee

Zero-plagiarism guarantee

Free-revision policy

Privacy policy

Fair-cooperation guarantee