HW Questions-EXAM 2

question

The assumption of "perfect competition" simplifies economic profit maximization because...

answer

we can assume that prices are 'fixed' regardless of the decisions of our individual firm.

question

Profit Maximization

answer

adjusting input levels until the difference between TRP and TFC is maximized.

question

Marginal Revenue Product (MRP)

answer

MPP x Price of Output.

question

Marginal Revenue Product (MRP)

answer

the additional value of output obtained from each additional unit of the variable input.

question

Marginal Factor Cost (MFC)

answer

price of variable input.

question

Marginal Factor Cost (MFC)

answer

the additional cost of using 1 more unit of the variable input.

question

Another way to maximize profits

answer

Continue to add variable input until MRP=MFC.

question

Another way to maximize profits

answer

continue to add variable input as long as the additional revenue exceeds the price of the variable input.

question

Another way to maximize profits

answer

continue to add variable input as long as additional benefits exceed additional costs.

question

If the price of the output (Py) increases significantly ceteris paribus, the profit maximizing producer will...

answer

use more variable input and produce more output.

question

If the price of the variable input (Px) increases significantly ceteris paribus, the profit maximizing producer will...

answer

use less variable input and produce less output.

question

TRP and MRP cannot be graphed on the same 2 dimensional graph because...

answer

they are not measured in the same units.

question

Constant costs

answer

average "per unit" costs do not change as output increases.

question

A copper mine would likely exhibit...

answer

increasing costs.

question

If MC is greater than AVC then...

answer

AVC is increasing.

question

Decreasing costs

answer

average costs (per unit costs) decline as output increases.

question

Marginal decision making

answer

decision makers compare costs and benefits incrementally (one unit at a time).

question

The perfect competition characteristic of a large number of buyers and sellers

answer

no individual buyer or seller can influence price.

question

The perfect competition characteristic of "freedom of entry and exit"

answer

there are no laws or regulations dictating who can operate businesses in the industry.

question

The "major" point to remember about perfect competition

answer

prices are given - participants are price takers.

question

Total Revenue Product (TRP)

answer

is calculated by multiplying TPP by price output.

question

Total Revenue Product (TRP)

answer

transforms the physical relationship of TPP into an economic relationship.

question

Total Revenue Product (TRP)

answer

looks just like TPP (production function) when graphed.

question

Total Factor Cost (TFC)

answer

is simply the number of units of the variable input multiplied by the price of the variable input.

question

If a tax credit is placed on fertilizer (lowering the price of fertilizer), then a corn producer will produce:

answer

more corn.

question

Marginal revenue

answer

additional revenue from selling one more unit of output.

question

breakeven point

answer

If the price of output is equal to the minimum average total cost, then this will result in:

question

If we are experiencing negative profits, then...

answer

we should shut down when P(Y)< Min AVC.

question

Marginal Revenue Product (MRP)

answer

revenue from using one more unit of input.

question

If the price of herbicide increases, then the producer of herbicide will want to:

answer

supply more herbicide.

question

The two curves that are mirror images of each other.

answer

TPP vs. TC

question

The explanation "variable costs go up as we use more variable input, and therefore as we produce more output" explains why:

answer

TC is a function of Y.

question

Isoquant

answer

Various combinations of 2 variable inputs that result in the same level of output.

question

Relative Prices

answer

The decision regarding where to be on a particular Isoquant is all about...

1 of 34

question

The assumption of "perfect competition" simplifies economic profit maximization because...

answer

we can assume that prices are 'fixed' regardless of the decisions of our individual firm.

question

Profit Maximization

answer

adjusting input levels until the difference between TRP and TFC is maximized.

question

Marginal Revenue Product (MRP)

answer

MPP x Price of Output.

question

Marginal Revenue Product (MRP)

answer

the additional value of output obtained from each additional unit of the variable input.

question

Marginal Factor Cost (MFC)

answer

price of variable input.

question

Marginal Factor Cost (MFC)

answer

the additional cost of using 1 more unit of the variable input.

question

Another way to maximize profits

answer

Continue to add variable input until MRP=MFC.

question

Another way to maximize profits

answer

continue to add variable input as long as the additional revenue exceeds the price of the variable input.

question

Another way to maximize profits

answer

continue to add variable input as long as additional benefits exceed additional costs.

question

If the price of the output (Py) increases significantly ceteris paribus, the profit maximizing producer will...

answer

use more variable input and produce more output.

question

If the price of the variable input (Px) increases significantly ceteris paribus, the profit maximizing producer will...

answer

use less variable input and produce less output.

question

TRP and MRP cannot be graphed on the same 2 dimensional graph because...

answer

they are not measured in the same units.

question

Constant costs

answer

average "per unit" costs do not change as output increases.

question

A copper mine would likely exhibit...

answer

increasing costs.

question

If MC is greater than AVC then...

answer

AVC is increasing.

question

Decreasing costs

answer

average costs (per unit costs) decline as output increases.

question

Marginal decision making

answer

decision makers compare costs and benefits incrementally (one unit at a time).

question

The perfect competition characteristic of a large number of buyers and sellers

answer

no individual buyer or seller can influence price.

question

The perfect competition characteristic of "freedom of entry and exit"

answer

there are no laws or regulations dictating who can operate businesses in the industry.

question

The "major" point to remember about perfect competition

answer

prices are given - participants are price takers.

question

Total Revenue Product (TRP)

answer

is calculated by multiplying TPP by price output.

question

Total Revenue Product (TRP)

answer

transforms the physical relationship of TPP into an economic relationship.

question

Total Revenue Product (TRP)

answer

looks just like TPP (production function) when graphed.

question

Total Factor Cost (TFC)

answer

is simply the number of units of the variable input multiplied by the price of the variable input.

question

If a tax credit is placed on fertilizer (lowering the price of fertilizer), then a corn producer will produce:

answer

more corn.

question

Marginal revenue

answer

additional revenue from selling one more unit of output.

question

breakeven point

answer

If the price of output is equal to the minimum average total cost, then this will result in:

question

If we are experiencing negative profits, then...

answer

we should shut down when P(Y)< Min AVC.

question

Marginal Revenue Product (MRP)

answer

revenue from using one more unit of input.

question

If the price of herbicide increases, then the producer of herbicide will want to:

answer

supply more herbicide.

question

The two curves that are mirror images of each other.

answer

TPP vs. TC

question

The explanation "variable costs go up as we use more variable input, and therefore as we produce more output" explains why:

answer

TC is a function of Y.

question

Isoquant

answer

Various combinations of 2 variable inputs that result in the same level of output.

question

Relative Prices

answer

The decision regarding where to be on a particular Isoquant is all about...

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HW Questions-EXAM 2

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