Microeconomics Unit 4 - Custom Scholars
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# Microeconomics Unit 4

question
how to calculate total revenue?
Price x Quantity
question
how to calculate total profit?
total revenue - total cost
question
how to calculate total cost?
fixed cost + variable cost
question
what is the challenge of producers in the market?
produce the quantity that leads to the maximum profit
question
in the long run all production factors are....
variable
question
what production factors do the companies need to operate (used to construct the production function)?
capital (K)
and
labor (L)
question
what is the production function?
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?
capital
question
what does the slope of the production function measure?
the marginal product
question
what is the marginal product of any input in the production process?
the change in the quantity of output obtained from one additional unit of that input.
question
what is the total cost curve?
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?
it gets steeper
question
what happens to the production function as quantity produced increases?
it flattens
question
what is productivity?
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.
question
what is the average product?
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?
The higher the average product, the more productive a factor of production is and vice versa.
question
how do you calculate average product?
AC=(total output in units/units of factors of production)

Total cost/quantity=AC
question
how do you calculate marginal product?
(change in output/change in quantity of factors used)
question
This minimum average total cost plays a key role in the analysis of what?
competitive firms.
question
When marginal cost is less than average total cost what happens to the average total cost?
average total cost is falling
question
When marginal cost is greater that average total cost what happens to the average total cost?
average total cost is rising
question
where does the marginal-cost curve cross the average-total-cost curve?
at its minimum
question
how to calculate average variable cost?
variable cost/quantity
question
how to calculate average fixed cost?
fixed cost/quantity
question
what causes marginal cost to rise?
as the quantity of output produced increases (it reflects the diminishing marginal product).
question
what is marginal cost?
the cost of producing one more unit of a good
question
how to calculate marginal cost?
change in total cost / change in quantity
question
what is the marginal cost of a standard total cost function?
the marginal cost is the tangent line at any given point along the curve
question
what always happens to average fixed costs?
always decline (because the fixed cost is getting spread over a larger number of units).
question
what happens to average variable costs?
usually rises as output increases (because of diminishing marginal product).
question
what is the efficient scale of the firm?
The bottom of the U-shape at the quantity that minimizes average total cost
question
what is a fixed cost?
A cost that doesn't change as a consequence of a change in production.
question
what are variable costs?
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?
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?
on or above the long run curve
question
how to calculate average total cost function?
average fixed cost+average variable cost

or

(fixed cost/quantity)+(variable cost/quantity)
question
elements of the total cost function in the short run? (graphed)
(graphed)
average fixed cost
average variable cost
average total cost
marginal cost
question
elements of a total cost function in the long run? (graphed)
average total cost
marginal cost
question
how to calculate average revenue?
total revenue/quantity=p
question
how to calculate marginal revenue?
marginal revenue= p
question
how to calculate profit?
total revenue - total cost
question
how to maximize the profit function?
TR(q)'-TC(q)'=0

P=MC
question
the rule regarding price and marginal cost if the production is above the minimum of the variable cost.
price= marginal cost
question
price=marginal cost if
the production is above the minimum of the variable cost.
question
what is the profit maximizing condition?
Q such that MR = MC
question
If Q is such that Marg Rev > Marg Cost
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
by decreasing Q, the resulting decrease in Total Revenue is lower than
the decrease in Total Costs, therefore profit increase
question
profit maximizing condition in a competitive market?
Q such that: p = Marginal Cost
question
what is the sufficient condition for maximizing profits?
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?
Average Revenue - Average Cost

Total Profit = Per Unit Profit x Q
question
if average cost is greater than average revenue...
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)?
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?
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?
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?
where MC and ATC intercept
above this break even point MC is the supply curve
question
for the short run supply curve what are the losses?
the total fixed cost
question
when is maximum average product reached?
Average Product = Marginal Product
question
If Marginal Productivity is decreasing,
we have diminishing returns
question
If Marginal Productivity is above Average Product,
Average Product will increase
question
If Marginal Productivity is below Average Product,
Average Product will decrease
1 of 60
question
how to calculate total revenue?
Price x Quantity
question
how to calculate total profit?
total revenue - total cost
question
how to calculate total cost?
fixed cost + variable cost
question
what is the challenge of producers in the market?
produce the quantity that leads to the maximum profit
question
in the long run all production factors are....
variable
question
what production factors do the companies need to operate (used to construct the production function)?
capital (K)
and
labor (L)
question
what is the production function?
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?
capital
question
what does the slope of the production function measure?
the marginal product
question
what is the marginal product of any input in the production process?
the change in the quantity of output obtained from one additional unit of that input.
question
what is the total cost curve?
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?
it gets steeper
question
what happens to the production function as quantity produced increases?
it flattens
question
what is productivity?
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.
question
what is the average product?
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?
The higher the average product, the more productive a factor of production is and vice versa.
question
how do you calculate average product?
AC=(total output in units/units of factors of production)

Total cost/quantity=AC
question
how do you calculate marginal product?
(change in output/change in quantity of factors used)
question
This minimum average total cost plays a key role in the analysis of what?
competitive firms.
question
When marginal cost is less than average total cost what happens to the average total cost?
average total cost is falling
question
When marginal cost is greater that average total cost what happens to the average total cost?
average total cost is rising
question
where does the marginal-cost curve cross the average-total-cost curve?
at its minimum
question
how to calculate average variable cost?
variable cost/quantity
question
how to calculate average fixed cost?
fixed cost/quantity
question
what causes marginal cost to rise?
as the quantity of output produced increases (it reflects the diminishing marginal product).
question
what is marginal cost?
the cost of producing one more unit of a good
question
how to calculate marginal cost?
change in total cost / change in quantity
question
what is the marginal cost of a standard total cost function?
the marginal cost is the tangent line at any given point along the curve
question
what always happens to average fixed costs?
always decline (because the fixed cost is getting spread over a larger number of units).
question
what happens to average variable costs?
usually rises as output increases (because of diminishing marginal product).
question
what is the efficient scale of the firm?
The bottom of the U-shape at the quantity that minimizes average total cost
question
what is a fixed cost?
A cost that doesn't change as a consequence of a change in production.
question
what are variable costs?
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?
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?
on or above the long run curve
question
how to calculate average total cost function?
average fixed cost+average variable cost

or

(fixed cost/quantity)+(variable cost/quantity)
question
elements of the total cost function in the short run? (graphed)
(graphed)
average fixed cost
average variable cost
average total cost
marginal cost
question
elements of a total cost function in the long run? (graphed)
average total cost
marginal cost
question
how to calculate average revenue?
total revenue/quantity=p
question
how to calculate marginal revenue?
marginal revenue= p
question
how to calculate profit?
total revenue - total cost
question
how to maximize the profit function?
TR(q)'-TC(q)'=0

P=MC
question
the rule regarding price and marginal cost if the production is above the minimum of the variable cost.
price= marginal cost
question
price=marginal cost if
the production is above the minimum of the variable cost.
question
what is the profit maximizing condition?
Q such that MR = MC
question
If Q is such that Marg Rev > Marg Cost
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
by decreasing Q, the resulting decrease in Total Revenue is lower than
the decrease in Total Costs, therefore profit increase
question
profit maximizing condition in a competitive market?
Q such that: p = Marginal Cost
question
what is the sufficient condition for maximizing profits?
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?
Average Revenue - Average Cost

Total Profit = Per Unit Profit x Q
question
if average cost is greater than average revenue...
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)?
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?
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?
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?
where MC and ATC intercept
above this break even point MC is the supply curve
question
for the short run supply curve what are the losses?
the total fixed cost
question
when is maximum average product reached?
Average Product = Marginal Product
question
If Marginal Productivity is decreasing,
we have diminishing returns
question
If Marginal Productivity is above Average Product,
Average Product will increase
question
If Marginal Productivity is below Average Product,
Average Product will decrease

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