Micro Econ Ch 13 - Custom Scholars
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# Micro Econ Ch 13

question
Accounting profit is equal to total revenue minus
a. implicit costs.
b. variable costs.
c. the sum of implicit and explicit costs.
d. explicit costs.
e. marginal costs.
explicit costs.
question
Economic profit is equal to total revenue minus
a. variable costs.
b. implicit costs.
c. explicit costs.
d. marginal costs.
the sum of implicit and explicit costs.
question
Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for €100 each. It costs Nicole €20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested €100,000 in her factory and equipment: €50,000 from her savings and €50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 per cent, too.) Nicole can work at a competing pottery factory for €40,000 per year. The accounting profit at Nicole's pottery factory is
a.€30,000.
b.€35,000.
c.€75,000.
d.€70,000.
e.€80,000.
\$75,000.
question
Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for €100 each. It costs Nicole €20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested €100,000 in her factory and equipment: €50,000 from her savings and €50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Nicole can work at a competing pottery factory for €40,000 per year. The economic profit at Nicole's pottery factory is
a.€80,000.
b.€30,000.
c.€75,000.
d.€70,000.
e.€35,000.
\$30,000.
question
If there are implicit costs of production,
a. accounting profit will exceed economic profit.
b. economic profit will always be zero.
c. economic profit will exceed accounting profit.
d. accounting profit will always be zero.
e. economic profit and accounting profit will be equal.
accounting profit will exceed economic profit.
question
If a production function exhibits diminishing marginal product, its slope
a. is linear (a straight line).
b. becomes steeper as the quantity of the input increases.
c. could be any of these answers.
d. becomes flatter as the quantity of the input increases.
becomes flatter as the quantity of the input increases.
question
If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve
a. is linear (a straight line).
b. could be any of these answers.
c. becomes steeper as the quantity of output increases.
d. becomes flatter as the quantity of output increases.
becomes steeper as the quantity of output increases.
question
Which of the following is a variable cost in the short run?
a. rent on the factory
b. wages paid to factory labour
c. interest payments on borrowed financial capital
d. payment on the lease for factory equipment
e. salaries paid to upper management.
wages paid to factory labor.
question
When marginal costs are below average total costs,
a. average fixed costs are rising.
b. average total costs are falling.
c. average total costs are rising.
d. average total costs are minimized.
average total costs are falling.
question
If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will
a. be flat (horizontal).
b. slope upward.
c. slope downward.
d. be U-shaped.
be U-shaped.
question
In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience
a. an increase in average total costs.
b. diseconomies of scale.
c. economies of scale.
d. constant returns to scale.
economies of scale.
question
The efficient scale of production is the quantity of output that minimizes
a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.
average total cost.
question
Which of the following statements is true?
a. All costs are fixed in the short run.
b. All costs are variable in the long run.
c. All costs are variable in the short run.
d. All costs are fixed in the long run.
All costs are variable in the long run.
question
If marginal costs equal average total costs,
average total costs are minimized.
question
Total Revenue
-The amount a firm receives for the sale of its output
-Equals the quantity of output the firm produces times the price at which it sells its output (PxQ=TR)
EX: Caroline produces 10,000 cookies and sells them at \$2 a cookie, her total revenue is \$20,000.
question
Total Cost
The market value of the inputs a firm uses in production
question
Profit
Total revenue minus total cost (P=TR-TC)
question
Explicit Costs
Input costs that require an outlay of money by the firm
question
Implicit Costs
Input costs that do not require an outlay of money by the firm
question
Economic Profit
Total revenue minus total cost, including both explicit and implicit costs (TR-TC(EC-IC))
- For a business to be profitable from an economist's standpoint, total revenue must cover all the opportunity costs, both explicit and implicit.
- A firm making positive economic profit will stay in business.
- When a firm is making economic losses (that is, when economic profits are negative), the business owners are failing to earn enough revenue to cover all the costs of production.
question
Accounting Profit
Total revenue minus total explicit cost (TR-EC)
- Accounting profit is usually larger than economic profit.
question
Production Function
The relationship between quantity of inputs used to make a good and the quantity of output of that good
question
Marginal revenue changes as what changes
The amount of output sold
question
Diminishing Marginal Product
The property whereby the marginal product of an input declines as the quantity of the input increases
- As the number of workers increases, the marginal product declines, and the production function becomes flatter.
question
Fixed Costs
Costs that do not vary with the quantity of output produced
EX: fixed costs include any rent he pays because this cost is the same regardless of how much coffee he produces.
question
Variable Costs
Costs that vary with the quantity of output produced
EX: variable costs include the cost of coffee beans, milk, sugar, and paper cups... the salaries of these workers are variable costs.
question
Average Total Cost
Total cost divided by the quantity of output (TC/Q)
question
Average Fixed Cost
Fixed cost divided by the quantity of output (FC/Q)
question
Average Variable Cost
Variable cost divided by the quantity of output (VC/Q)
question
Marginal Cost
The increase in total cost that arises from an extra unit of production
question
Efficient Scale
The quantity of output that minimizes average total cost
question
Whenever marginal cost is less than average total cost,
average total cost is falling.
question
Whenever marginal cost is greater than average total cost,
average total cost is rising.
question
The marginal-cost curve crosses the average-total-cost curve at its minimum. Why?
This point of intersection is the minimum of average total cost.
question
The cost curves shown here share the three properties that are most important to remember:
- Marginal cost eventually rises with the quantity of output.
- The average-total-cost curve is U-shaped.
- The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost.
question
Many decisions are
fixed in the short run but variable in the long run
question
Economies of Scale
The property whereby long-run average total cost falls as the quantity of output increases
EX: Often arise because higher production levels allow specialization among workers, which permits each worker to become better at a specific task. For instance, if Ford hires a large number of workers and produces a large number of cars, it can reduce costs with modern assembly-line production.
question
Diseconomies of Scale
The property whereby long-run average total cost rises as the quantity of output increases
EX: Diseconomies of scale can arise because of coordination problems that are inherent in any large organization. The more cars Ford produces, the more stretched the management team becomes, and the less effective the managers become at keeping costs down.
question
Constant Returns to Scale
The property whereby long-run average total cost stays the same as the quantity of output changes
question
Overview
Explicit costs
Costs that require an outlay of money by the firm

Implicit costs
Costs that do not require an outlay of money by the firm

Fixed costs
Costs that do not vary with the quantity of output produced
FC
Variable costs
Costs that vary with the quantity of output produced
VC
Total cost
The market value of all the inputs that a firm uses in production
TC= FC+ VC
Average fixed cost
Fixed cost divided by the quantity of output
AFC= FC/Q
Average variable cost
Variable cost divided by the quantity of output
AVC= VC/Q
Average total cost
Total cost divided by the quantity of output
ATC= TC/Q
Marginal cost
The increase in total cost that arises from an extra unit of production
MC= Δ TC/Δ Q
1 of 40
question
Accounting profit is equal to total revenue minus
a. implicit costs.
b. variable costs.
c. the sum of implicit and explicit costs.
d. explicit costs.
e. marginal costs.
explicit costs.
question
Economic profit is equal to total revenue minus
a. variable costs.
b. implicit costs.
c. explicit costs.
d. marginal costs.
the sum of implicit and explicit costs.
question
Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for €100 each. It costs Nicole €20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested €100,000 in her factory and equipment: €50,000 from her savings and €50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 per cent, too.) Nicole can work at a competing pottery factory for €40,000 per year. The accounting profit at Nicole's pottery factory is
a.€30,000.
b.€35,000.
c.€75,000.
d.€70,000.
e.€80,000.
\$75,000.
question
Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for €100 each. It costs Nicole €20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested €100,000 in her factory and equipment: €50,000 from her savings and €50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Nicole can work at a competing pottery factory for €40,000 per year. The economic profit at Nicole's pottery factory is
a.€80,000.
b.€30,000.
c.€75,000.
d.€70,000.
e.€35,000.
\$30,000.
question
If there are implicit costs of production,
a. accounting profit will exceed economic profit.
b. economic profit will always be zero.
c. economic profit will exceed accounting profit.
d. accounting profit will always be zero.
e. economic profit and accounting profit will be equal.
accounting profit will exceed economic profit.
question
If a production function exhibits diminishing marginal product, its slope
a. is linear (a straight line).
b. becomes steeper as the quantity of the input increases.
c. could be any of these answers.
d. becomes flatter as the quantity of the input increases.
becomes flatter as the quantity of the input increases.
question
If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve
a. is linear (a straight line).
b. could be any of these answers.
c. becomes steeper as the quantity of output increases.
d. becomes flatter as the quantity of output increases.
becomes steeper as the quantity of output increases.
question
Which of the following is a variable cost in the short run?
a. rent on the factory
b. wages paid to factory labour
c. interest payments on borrowed financial capital
d. payment on the lease for factory equipment
e. salaries paid to upper management.
wages paid to factory labor.
question
When marginal costs are below average total costs,
a. average fixed costs are rising.
b. average total costs are falling.
c. average total costs are rising.
d. average total costs are minimized.
average total costs are falling.
question
If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will
a. be flat (horizontal).
b. slope upward.
c. slope downward.
d. be U-shaped.
be U-shaped.
question
In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience
a. an increase in average total costs.
b. diseconomies of scale.
c. economies of scale.
d. constant returns to scale.
economies of scale.
question
The efficient scale of production is the quantity of output that minimizes
a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.
average total cost.
question
Which of the following statements is true?
a. All costs are fixed in the short run.
b. All costs are variable in the long run.
c. All costs are variable in the short run.
d. All costs are fixed in the long run.
All costs are variable in the long run.
question
If marginal costs equal average total costs,
average total costs are minimized.
question
Total Revenue
-The amount a firm receives for the sale of its output
-Equals the quantity of output the firm produces times the price at which it sells its output (PxQ=TR)
EX: Caroline produces 10,000 cookies and sells them at \$2 a cookie, her total revenue is \$20,000.
question
Total Cost
The market value of the inputs a firm uses in production
question
Profit
Total revenue minus total cost (P=TR-TC)
question
Explicit Costs
Input costs that require an outlay of money by the firm
question
Implicit Costs
Input costs that do not require an outlay of money by the firm
question
Economic Profit
Total revenue minus total cost, including both explicit and implicit costs (TR-TC(EC-IC))
- For a business to be profitable from an economist's standpoint, total revenue must cover all the opportunity costs, both explicit and implicit.
- A firm making positive economic profit will stay in business.
- When a firm is making economic losses (that is, when economic profits are negative), the business owners are failing to earn enough revenue to cover all the costs of production.
question
Accounting Profit
Total revenue minus total explicit cost (TR-EC)
- Accounting profit is usually larger than economic profit.
question
Production Function
The relationship between quantity of inputs used to make a good and the quantity of output of that good
question
Marginal revenue changes as what changes
The amount of output sold
question
Diminishing Marginal Product
The property whereby the marginal product of an input declines as the quantity of the input increases
- As the number of workers increases, the marginal product declines, and the production function becomes flatter.
question
Fixed Costs
Costs that do not vary with the quantity of output produced
EX: fixed costs include any rent he pays because this cost is the same regardless of how much coffee he produces.
question
Variable Costs
Costs that vary with the quantity of output produced
EX: variable costs include the cost of coffee beans, milk, sugar, and paper cups... the salaries of these workers are variable costs.
question
Average Total Cost
Total cost divided by the quantity of output (TC/Q)
question
Average Fixed Cost
Fixed cost divided by the quantity of output (FC/Q)
question
Average Variable Cost
Variable cost divided by the quantity of output (VC/Q)
question
Marginal Cost
The increase in total cost that arises from an extra unit of production
question
Efficient Scale
The quantity of output that minimizes average total cost
question
Whenever marginal cost is less than average total cost,
average total cost is falling.
question
Whenever marginal cost is greater than average total cost,
average total cost is rising.
question
The marginal-cost curve crosses the average-total-cost curve at its minimum. Why?
This point of intersection is the minimum of average total cost.
question
The cost curves shown here share the three properties that are most important to remember:
- Marginal cost eventually rises with the quantity of output.
- The average-total-cost curve is U-shaped.
- The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost.
question
Many decisions are
fixed in the short run but variable in the long run
question
Economies of Scale
The property whereby long-run average total cost falls as the quantity of output increases
EX: Often arise because higher production levels allow specialization among workers, which permits each worker to become better at a specific task. For instance, if Ford hires a large number of workers and produces a large number of cars, it can reduce costs with modern assembly-line production.
question
Diseconomies of Scale
The property whereby long-run average total cost rises as the quantity of output increases
EX: Diseconomies of scale can arise because of coordination problems that are inherent in any large organization. The more cars Ford produces, the more stretched the management team becomes, and the less effective the managers become at keeping costs down.
question
Constant Returns to Scale
The property whereby long-run average total cost stays the same as the quantity of output changes
question
Overview
Explicit costs
Costs that require an outlay of money by the firm

Implicit costs
Costs that do not require an outlay of money by the firm

Fixed costs
Costs that do not vary with the quantity of output produced
FC
Variable costs
Costs that vary with the quantity of output produced
VC
Total cost
The market value of all the inputs that a firm uses in production
TC= FC+ VC
Average fixed cost
Fixed cost divided by the quantity of output
AFC= FC/Q
Average variable cost
Variable cost divided by the quantity of output
AVC= VC/Q
Average total cost
Total cost divided by the quantity of output
ATC= TC/Q
Marginal cost
The increase in total cost that arises from an extra unit of production
MC= Δ TC/Δ Q

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