Econ-201 (13,14,15,16)
efficient scale of production
lowest point on average total cost curve
Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. In producing the 7,000 pounds of cheese, the firm's average fixed cost was
$1.71
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. At Q = 999, the firm's total costs equal
$24,980
Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. How much profit will the museum earn if it engages in price discrimination?
$800
Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will fall even further next semester if he performs worse than (i) his cumulative GPA. (ii)he ever performed before. (iii)he did last semester.
(i) and (ii) only
average variable cost
(total cost-fixed cost)/ quantity of output
marginal product
+1 unit of output example: when the number of workers goes from 1 to 2, cookies made goes from 50 to 90, so the marginal product of the worker #2 is 40 cookies
A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.
False
Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,
Jose's restaurant should shut down immediately.
calculate profit
Revenue - cost
Suppose that for a particular business there are no implicit costs. Then
accounting profit will be the same as economic profit.
diminishing marginal product
as the number of workers increases, the marginal product declines *less access to equipment due to the # of workers
The firm's efficient scale is the quantity of output that minimizes
average total cost
total cost
average total cost x quantity - marginal cost
competitive market
basic items wheat, corn, water, milk NO BRAND LOYALTY
monopolist
buyers have market power i.e. walmart negotiates with vendors
Marginal revenue for a monopolist is computed as
change in total revenue per one unit increase in quantity sold.
economic profit
count foregone income as a cost because it will affect the decisions the firms make in their business =total revenue - all opportunity costs of producing the goods and services sold
When firms are neither entering nor exiting a perfectly competitive market,
economic profits must be zero.
explicit cost
direct outlay for factors of production
implicit cost
do not involve direct money outlay *implicit cost of almost ever business is the money invested into it
variable cost
does change as the firm alters the quantity of output provided
fixed cost
does not change or vary with quantity of output produced
the typical demand curve for a monopoly is
downward sloping
excess capacity
gap between efficient scale of production and output bad to society doesnt offset anything
opportunity cost of owning a business
interest on the bank loan + the forgone interests on savings
maximize profits
marginal revenue= marginal cost
In the short run, a firm in a monopolistically competitive market operates much like a
monopolist
Which of the following is an example of a monopolistically competitive industry?
movies
Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning
no economic profit since it is charging a price equal to it average total cost.
oligopoly
only a few firms selling in a noncompetitive market (less than 10) i.e. people call AT&T and tell them they can get a beller deal at verizon and AT&T lowers their price
accounting profit
only measure explicit costs =firms total revenue - firms explicit costs
Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is
perfectly elastic
horizontal line on the graph
perfectly elastic
maximize price
take quantity where marginal revenue is equal to marginal cost and go up all the way till you reach the demand curve and find the number on the price axis.
as long as average total cost is greater than average variable cost
the firm can stay in business.
when price and average total cost is the same
the firm is making zero economic profit
When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost
the firm may be incurring economic losses
price is always greater than marginal cost
true
total cost on a graph
where ATC meets MC
Based upon the information shown, how many units will Bearclaws produce to maximize profits?
where marginal revenue meets marginal cost