ECON chapter 13 and 14

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L=12, Q=122) and (L=13, and Q=132). Then the marginal product of the 13th worker is what?

10 units of output

economies of scale

ATC falls as the quantity of output increases

marginal revenue=

market price

marginal revenue is always equal to what?

market price in a competitive market

suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

new firms to enter the market

Total Fixed Costs=

TC-TVC

Average Variable Costs=

Variable cost/quantity

when marginal cost is less than average total cost,

average total cost is falling

Cody builds mailboxes. If he charges $20 for each mailbox, his total revenue will be what? a. 1,000 if he sells 100 mailboxes b. 500 if he sells 25 mailboces c. 20 regardless of how many mailboxes he sells d. $200 if he sells 5 mailboxes

b. $500 if he sells 25 mailboxes $20 x 25=500

brady industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firms total fixed costs = a. $2 b. $4 c. $1000 d. $2,000

c. 1,000

Pete own a shoe shine business. His accountant most likely includes which of the following costs on his financial statements? a. wages pete could earn washing windows b. dividends pete's money was earning in the stock market before pete sold his stock and cought a shoe shine booth c. the cost of shoe polish

c. the cost of shoe polish

In the long run Al's Sandwich shop incurs total costs of $2500 when output is 1250 units and $3000 when output is 1500 units. For this range of output, Al exhibits

constant returns to scale

if a firm in a competitive market doubles its number of units sold, total revenue for the firm will

double

a competitive market is in long run equilibirum. if demand decreases ,we can be certain that price will

fall in the short run. All, some, or no firms will shut down and some of them will exit the industry. Price will then rise to reach the new long-run equilibirum

in the long run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then

firms are operating at their efficient scale

what is an implicit cost?

input costs that do not require an outlay of money by the firm ex: wage of the owner, opportunity cost, rent of using the factoor owned by the firm

short run supply curve is where what?

marginal cost = average variable cost

in the short run, a firm's supply curve is equal to the

marginal cost curve above its average variable cost

TR=

price times quantity

a firm that wants to achieve economies of scale could do so by

producing an output level lower than the efficient scale

what is an explicit cost?

require an outlay of money by the firm (labor, wage of workers, money on new machines) ex: cost of shoe polish

when comparing short run average total cost with long run average total cost at a given level of output,

short run average total cost is typically above long run average total cost

when total revenue is less than variable costs, a firm in a competitive market will

shut down - if your costs are greater than your revenue then you are going to want to shut down

where the Average Total Cost meets the marginal cost is what?

the efficient scale

marginal cost curve is always what?

upward sloping

total cost curve is what shape

upward sloping convex

what are some examples of implicit costs?

wages pete could earn washing windows dividends pete's money was earning in the stock market before pete sold his stock and bought a shoe shine booth

in the long run equilibrium, each firm in a competitive industry earns a. zero accounting profits b. zero economic profits c. positive economic profits

zero economic profits