question

how to calculate total revenue?

answer

Price x Quantity

question

how to calculate total profit?

answer

total revenue - total cost

question

how to calculate total cost?

answer

fixed cost + variable cost

question

what is the challenge of producers in the market?

answer

produce the quantity that leads to the maximum profit

question

in the long run all production factors are....

answer

variable

question

what production factors do the companies need to operate (used to construct the production function)?

answer

capital (K)

and

labor (L)

and

labor (L)

question

what is the production function?

answer

a graphic representation of the technical relationship between the amount of output (production) and the amount on input used in the production.

question

short term for the production function which production factor is fixed?

answer

capital

question

what does the slope of the production function measure?

answer

the marginal product

question

what is the marginal product of any input in the production process?

answer

the change in the quantity of output obtained from one additional unit of that input.

question

what is the total cost curve?

answer

the graphic representation of relationship between quantity produced (on the horizontal axis) and total cost (on the vertical axis)

question

what happens to the total cost curve as quantity produced increases?

answer

it gets steeper

question

what happens to the production function as quantity produced increases?

answer

it flattens

question

what is productivity?

answer

measures output per unit of input, such as labor, capital or any other resource

a measure of how efficient is a firm in producing a good. It is the

key source of economic growth and competitiveness.

a measure of how efficient is a firm in producing a good. It is the

key source of economic growth and competitiveness.

question

what is the average product?

answer

equals the units of output produced per unit of a factor of production while keeping other factors of production constant.

question

what does the result of the average product mean?

answer

The higher the average product, the more productive a factor of production is and vice versa.

question

how do you calculate average product?

answer

AC=(total output in units/units of factors of production)

Total cost/quantity=AC

Total cost/quantity=AC

question

how do you calculate marginal product?

answer

(change in output/change in quantity of factors used)

question

This minimum average total cost plays a key role in the analysis of what?

answer

competitive firms.

question

When marginal cost is less than average total cost what happens to the average total cost?

answer

average total cost is falling

question

When marginal cost is greater that average total cost what happens to the average total cost?

answer

average total cost is rising

question

where does the marginal-cost curve cross the average-total-cost curve?

answer

at its minimum

question

how to calculate average variable cost?

answer

variable cost/quantity

question

how to calculate average fixed cost?

answer

fixed cost/quantity

question

what causes marginal cost to rise?

answer

as the quantity of output produced increases (it reflects the diminishing marginal product).

question

what is marginal cost?

answer

the cost of producing one more unit of a good

question

how to calculate marginal cost?

answer

change in total cost / change in quantity

question

what is the marginal cost of a standard total cost function?

answer

the marginal cost is the tangent line at any given point along the curve

question

what always happens to average fixed costs?

answer

always decline (because the fixed cost is getting spread over a larger number of units).

question

what happens to average variable costs?

answer

usually rises as output increases (because of diminishing marginal product).

question

what is the efficient scale of the firm?

answer

The bottom of the U-shape at the quantity that minimizes average total cost

question

what is a fixed cost?

answer

A cost that doesn't change as a consequence of a change in production.

question

what are variable costs?

answer

Variable cost is a cost that depends on the quantity produced

question

what changes about the graph of the average cost function in the long run?

answer

has a much flatter U- shape than the short-run average-total-cost curve

question

when compared to the long-run average cost function curves the short run average cost function curve is where?

answer

on or above the long run curve

question

how to calculate average total cost function?

answer

average fixed cost+average variable cost

or

(fixed cost/quantity)+(variable cost/quantity)

or

(fixed cost/quantity)+(variable cost/quantity)

question

elements of the total cost function in the short run? (graphed)

answer

(graphed)

average fixed cost

average variable cost

average total cost

marginal cost

average fixed cost

average variable cost

average total cost

marginal cost

question

elements of a total cost function in the long run? (graphed)

answer

average total cost

marginal cost

marginal cost

question

how to calculate average revenue?

answer

total revenue/quantity=p

question

how to calculate marginal revenue?

answer

marginal revenue= p

question

how to calculate profit?

answer

total revenue - total cost

question

how to maximize the profit function?

answer

TR(q)'-TC(q)'=0

P=MC

P=MC

question

the rule regarding price and marginal cost if the production is above the minimum of the variable cost.

answer

price= marginal cost

question

price=marginal cost if

answer

the production is above the minimum of the variable cost.

question

what is the profit maximizing condition?

answer

Q such that MR = MC

question

If Q is such that Marg Rev > Marg Cost

answer

by increasing Q, the resulting increase in Total Revenue is higher than the increase in Total Costs, therefore profit increase.

question

If Q is such that Marg Rev < Marg Cost

answer

by decreasing Q, the resulting decrease in Total Revenue is lower than

the decrease in Total Costs, therefore profit increase

the decrease in Total Costs, therefore profit increase

question

profit maximizing condition in a competitive market?

answer

Q such that: p = Marginal Cost

question

what is the sufficient condition for maximizing profits?

answer

is that this equality was given in the increasing level of the MC. (on the graph p=MC when the u shaped curve is increasing and it intersects the market price)

question

how to calculate per unit profit?

answer

Average Revenue - Average Cost

Total Profit = Per Unit Profit x Q

Total Profit = Per Unit Profit x Q

question

if average cost is greater than average revenue...

answer

this is bad and means negative profits

question

when dealing with AVC and ATC and MgC (for short run supply curve maximization of profits) what is the minimum price access market (shut down below that point)?

answer

where AVC and MgC intercept

question

when dealing with AVC and ATC and MgC (for short run supply curve maximization of profits) what is the break even point?

answer

where ATC and MgC intercept

question

when dealing with AVC and ATC and MgC (for short run supply curve maximization of profits) where is MgC the supply curve?

answer

above the break even point (after ATC and MC intercept)

question

in the long run supply curve (ATC and MgC graphed) what is the minimum price access market?

answer

where MC and ATC intercept

above this break even point MC is the supply curve

above this break even point MC is the supply curve

question

for the short run supply curve what are the losses?

answer

the total fixed cost

question

when is maximum average product reached?

answer

Average Product = Marginal Product

question

If Marginal Productivity is decreasing,

answer

we have diminishing returns

question

If Marginal Productivity is above Average Product,

answer

Average Product will increase

question

If Marginal Productivity is below Average Product,

answer

Average Product will decrease

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