micro chp 9-10

question

producer theory

answer

all producers want to maximize profits, specialization and division of labor leads to increasing marginal product

question

accounting profit

answer

total revenue - explicit costs equals what?

question

explicit costs

answer

monetary outlays

question

economic profit

answer

total revenue - explicit and implicit costs

question

implicit costs

answer

includes opportunity cost of self-owned resources

question

fixed inputs

answer

constant, not easily changed, don't vary with output

question

variable inputs

answer

easily changed, vary with output
example : labor, raw resources

question

short run

answer

have BOTH fixed/variable inputs

question

long run

answer

ONLY variable inputs

question

total product

answer

total output produced by different amounts of labor

question

marginal product of labor

answer

how total product changes with an additional unit of labor

question

law of diminishing returns

answer

resources are of equal quality
technology is fixed
variable resources are added to fixed resources
at some point, marginal product will fall

question

fixed cost

answer

cost of fixed inputs
constant
present even if output(Q) = 0

question

variable costs

answer

cost of variable inputs
VARY with output
equals 0 when Q = 0

question

marginal cost

answer

additional total cost of producing an extra unit of output

question

LRATC (long run average total cost) curve 3 parts

answer

economies of scale
constant economies of scale
diseconomies of scale

question

economies of scale

answer

LRATC is falling as Q goes up
increasing returns to scale
if we increase inputs by 10%, our output increases by MORE than 10%

question

constant economies of scale

answer

LRATC is constant as Q goes up
constant returns to scale
if input increase by 10%, output increases by 10% exactly

question

diseconomies of scale

answer

LRATC is increasing as Q goes up
decreasing returns of scale
if inputs increase by 10%, put increases by LESS THAN 10%

question

minimum efficient scale

answer

quantity where LRATC is at a minimum
quantity where ATC is first at a minimum
helps dictate market size

question

natural monopoly

answer

ATC is minimized with only one firm in market
MES is high compared to demand
ex : utility companies (water, electric, gas)

question

pure perfect competiton

answer

many buyers/sellers
standardized/homogenous goods (same goods)
- agriculture
easy entry/exit
no control overprice

question

price takers

answer

view market price, then sell product for that price

question

purely competitive firms demand

answer

individual firms face a horizontal demand curve at the market price
-demand is PERFECTLY ELASTIC

question

marginal revenue

answer

additional revenue received from an extra unit sold

question

shut down rule

answer

shut down when price is less than minimal AVC

1 of 26

question

producer theory

answer

all producers want to maximize profits, specialization and division of labor leads to increasing marginal product

question

accounting profit

answer

total revenue - explicit costs equals what?

question

explicit costs

answer

monetary outlays

question

economic profit

answer

total revenue - explicit and implicit costs

question

implicit costs

answer

includes opportunity cost of self-owned resources

question

fixed inputs

answer

constant, not easily changed, don't vary with output

question

variable inputs

answer

easily changed, vary with output
example : labor, raw resources

question

short run

answer

have BOTH fixed/variable inputs

question

long run

answer

ONLY variable inputs

question

total product

answer

total output produced by different amounts of labor

question

marginal product of labor

answer

how total product changes with an additional unit of labor

question

law of diminishing returns

answer

resources are of equal quality
technology is fixed
variable resources are added to fixed resources
at some point, marginal product will fall

question

fixed cost

answer

cost of fixed inputs
constant
present even if output(Q) = 0

question

variable costs

answer

cost of variable inputs
VARY with output
equals 0 when Q = 0

question

marginal cost

answer

additional total cost of producing an extra unit of output

question

LRATC (long run average total cost) curve 3 parts

answer

economies of scale
constant economies of scale
diseconomies of scale

question

economies of scale

answer

LRATC is falling as Q goes up
increasing returns to scale
if we increase inputs by 10%, our output increases by MORE than 10%

question

constant economies of scale

answer

LRATC is constant as Q goes up
constant returns to scale
if input increase by 10%, output increases by 10% exactly

question

diseconomies of scale

answer

LRATC is increasing as Q goes up
decreasing returns of scale
if inputs increase by 10%, put increases by LESS THAN 10%

question

minimum efficient scale

answer

quantity where LRATC is at a minimum
quantity where ATC is first at a minimum
helps dictate market size

question

natural monopoly

answer

ATC is minimized with only one firm in market
MES is high compared to demand
ex : utility companies (water, electric, gas)

question

pure perfect competiton

answer

many buyers/sellers
standardized/homogenous goods (same goods)
- agriculture
easy entry/exit
no control overprice

question

price takers

answer

view market price, then sell product for that price

question

purely competitive firms demand

answer

individual firms face a horizontal demand curve at the market price
-demand is PERFECTLY ELASTIC

question

marginal revenue

answer

additional revenue received from an extra unit sold

question

shut down rule

answer

shut down when price is less than minimal AVC

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micro chp 9-10

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