Micro Unit 3: Module 52 – 57 & 72

question

explicit costs

answer

The actual payments a firm makes to its factors of production and other suppliers.

question

implicit costs

answer

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

question

accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

implicit cost of capital

answer

the opportunity cost of the use of one's own capital - the income earned if the capital had been employed in its next best alternative use

question

principle of marginal analysis

answer

every activity should continue until marginal benefit equals marginal cost

question

marginal revenue

answer

the change in total revenue from an additional unit sold

question

optimal output rule

answer

profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost (MR = MC)

question

marginal cost curve

answer

shows how the cost of producing one more unit depends on the quantity that has already been produced

question

marginal revenue curve

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

question

marginal product

answer

extra output due to the addition of one more unit of input

question

diminishing returns to an input

answer

the effect observed when AN INCREASE IN INPUT, while holding the levels of all other inputs fixed, LEADS TO A DECLINE IN MARGINAL PRODUCT

question

fixed costs (FC)

answer

costs that remain constant as output changes

question

variable costs (VC)

answer

costs that change as output changes

question

Total Cost (TC)

answer

total fixed costs plus total variable costs
TC = FC & VC

question

total cost curve

answer

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

question

average cost

answer

the total cost divided by the quantity produced

question

U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

question

average fixed cost (AFC)

answer

fixed cost divided by the quantity of output

question

average variable cost

answer

the variable cost per unit of output

question

average total cost (ATC)

answer

total cost divided by the quantity of output

(ATC = AFC + AVC)

question

minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

long-run average total cost curve (LRATC)

answer

the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

economies of scale

answer

long-run average total cost falls as the quantity of output increases

question

increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

(downward slope portion of the LRATC)

question

diseconomies of scale

answer

increases in cost per unit when output increases

question

decreasing returns to scale (diseconomies of scale)

answer

when long-run average total cost increases as output increases

question

constant returns to scale

answer

when long-run average total cost is constant as output increases

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

price-taking firm

answer

a firm whose actions have no effect on the market price of the good or service it sells

question

price-taking consumer

answer

a consumer whose actions have no effect on the market price of the good or service he or she buys

question

perfectly competitive market

answer

a market in which all market participants are price-takers

question

perfectly competitive industry

answer

an industry in which producers are price-takers

question

market share

answer

a company's product sales as a percentage of total sales for that industry

question

commodity

answer

a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk

question

free entry and exit

answer

when new producers can easily enter into an industry and existing producers can easily leave that industry

question

Monopolist

answer

a firm that is the only producer of a good that has no close substitutes

question

Monopoly

answer

the exclusive possession or control of the supply or trade in a commodity or service.

question

natural monopoly

answer

an industry in which one firm can achieve economies of scale over the entire range of market supply

question

patent

answer

(n.) exclusive rights over an invention; copyright; (v.) to arrange or obtain such rights;

question

answer

the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.

question

Oligopoly

answer

a market structure in which only a few sellers offer similar or identical products

question

imperfect competition

answer

occurs in markets that have few sellers or products that are not standardized

question

concentration ratio

answer

the value of sales by the top firms of an industry stated as a percentage of total industry sales

question

Herfindahl-Hirschman Index

answer

a measure of market concentration to estimate the degree of competition within an industry

question

monopolistic competition

answer

A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products.

question

cost-minimization rule

answer

hire factors so that the marginal product per dollar spent on each factor is the same

1 of 52

question

explicit costs

answer

The actual payments a firm makes to its factors of production and other suppliers.

question

implicit costs

answer

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

question

accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

implicit cost of capital

answer

the opportunity cost of the use of one's own capital - the income earned if the capital had been employed in its next best alternative use

question

principle of marginal analysis

answer

every activity should continue until marginal benefit equals marginal cost

question

marginal revenue

answer

the change in total revenue from an additional unit sold

question

optimal output rule

answer

profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost (MR = MC)

question

marginal cost curve

answer

shows how the cost of producing one more unit depends on the quantity that has already been produced

question

marginal revenue curve

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

question

marginal product

answer

extra output due to the addition of one more unit of input

question

diminishing returns to an input

answer

the effect observed when AN INCREASE IN INPUT, while holding the levels of all other inputs fixed, LEADS TO A DECLINE IN MARGINAL PRODUCT

question

fixed costs (FC)

answer

costs that remain constant as output changes

question

variable costs (VC)

answer

costs that change as output changes

question

Total Cost (TC)

answer

total fixed costs plus total variable costs
TC = FC & VC

question

total cost curve

answer

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

question

average cost

answer

the total cost divided by the quantity produced

question

U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

question

average fixed cost (AFC)

answer

fixed cost divided by the quantity of output

question

average variable cost

answer

the variable cost per unit of output

question

average total cost (ATC)

answer

total cost divided by the quantity of output

(ATC = AFC + AVC)

question

minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

long-run average total cost curve (LRATC)

answer

the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

economies of scale

answer

long-run average total cost falls as the quantity of output increases

question

increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

(downward slope portion of the LRATC)

question

diseconomies of scale

answer

increases in cost per unit when output increases

question

decreasing returns to scale (diseconomies of scale)

answer

when long-run average total cost increases as output increases

question

constant returns to scale

answer

when long-run average total cost is constant as output increases

question

sunk cost

answer

a cost that has already been paid and cannot be recovered

question

price-taking firm

answer

a firm whose actions have no effect on the market price of the good or service it sells

question

price-taking consumer

answer

a consumer whose actions have no effect on the market price of the good or service he or she buys

question

perfectly competitive market

answer

a market in which all market participants are price-takers

question

perfectly competitive industry

answer

an industry in which producers are price-takers

question

market share

answer

a company's product sales as a percentage of total sales for that industry

question

commodity

answer

a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk

question

free entry and exit

answer

when new producers can easily enter into an industry and existing producers can easily leave that industry

question

Monopolist

answer

a firm that is the only producer of a good that has no close substitutes

question

Monopoly

answer

the exclusive possession or control of the supply or trade in a commodity or service.

question

natural monopoly

answer

an industry in which one firm can achieve economies of scale over the entire range of market supply

question

patent

answer

(n.) exclusive rights over an invention; copyright; (v.) to arrange or obtain such rights;

question

answer

the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.

question

Oligopoly

answer

a market structure in which only a few sellers offer similar or identical products

question

imperfect competition

answer

occurs in markets that have few sellers or products that are not standardized

question

concentration ratio

answer

the value of sales by the top firms of an industry stated as a percentage of total industry sales

question

Herfindahl-Hirschman Index

answer

a measure of market concentration to estimate the degree of competition within an industry

question

monopolistic competition

answer

A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products.

question

cost-minimization rule

answer

hire factors so that the marginal product per dollar spent on each factor is the same

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Micro Unit 3: Module 52 – 57 & 72

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