econ midterm ch 8
TOTAL PROFIT (formula)
(P-ATC) x Q
When the marginal product of labor rises
the marginal cost of production falls.
Economic cost of production differ from accounting costs in that
economic cost adds the opportunity cost of a firm using its own resources while accounting cost does not.
Average fixed costs of production
falls as long as output is increased.
FC
fixed cost
Q
output/quantity
The long run average cost curve shows
the lowest average cost of producing every level of output in the long run.
How are implicit costs different from explicit costs?
An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost.
TC (formula)
FC + VC
AFC(formula)
FC/Q
What is the difference between the short run and the long run?
In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology.
Which of the following is true at the output level where average total cost is at its minimum?
Marginal cost equals average total cost.
TR (formula)
P x Q
PROFIT PER UNIT OF OUTPUT (formula)
P-ATC
ATC (formula)
TC/Q or AFC+AVC
PROFIT(formula)
TR-TC
AR(formula)
TR/Q
AVC(formula)
VC/Q
VC(formula)
WAGE x # OF WORKERS
Which of the following is true of the relationship between the average product of labor and the marginal product of labor
Whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be increasing
The marginal cost of production shows the change in a firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost curve? Graphically, the marginal cost curve is
a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.
AFC
average fixed cost
AR
average revenue
ATC
average total cost
AVC
average variable cost
Economies of scale occur when
a firm's long−run average total costs fall as it increases the quantity of output it produces.
MC
marginal cost
MPL
marginal product of labor
MR
marginal revenue
Long run costs are U−shaped because
of economies and diseconomies of scale.
P
price
Which of the following is an implicit cost of production?
rent that could have been earned on a building owned and used by the firm.
Technology is
the processes a firm uses to turn inputs into outputs of goods and services.
TC
total cost
Which of the following cost will not change as output changes?
total fixed cost
TR
total revenue
VC
variable cost
Suppose that last semester your semester GPA was 3.9 and your resulting cumulative GPA was 2.85 Next, suppose that this semester your semester GPA will be 3.2 If so, then your cumulative GPA
will increase because your "marginal" GPA will be above your cumulative GPA.
MC (formula)
∆TC/∆Q
MR(formula)
∆TR/∆Q