Econ key terms

When the cost of productive inputs rises supply does what

Decreases

Price and Quantity are

Directly related

If a firm can react quickly to a changing price, the supply is likely _____________.

Elastic

marginal cost

Extra cost of producing one additional unit of production.

Calculate total variable cost

# of workers (wages)

Total cost

All costs associated with production

Calculate marginal product

Change in Total Product/change in variable input

What are the six determinants of supply?

Cost of Productive inputs Productivity Technology Taxes Subsidies Producers expectations in future price Government Regulation Number of Sellers

When government regulation is increased supply is

Decreased

When taxes are increased supply is

Decreased

Explain the relationship between total product and marginal product.

The goal to product is the TOTAL out put produced by the firm and the marginal product is only the EXTRA output or change in a total product caused by adding one more unit of variable input .

Explain how businesses define their profit maximizing output using marginal analysis.

They compare their extra benefits of action to their extra costs of taking their action. This allows them to carefully decide when they have maximized total output. If the extra benefit exceeds the extra cost then they will hire more workers to maximize production.

Explain why e-commerce reduces firmed costs.

They do not need as much inventory because their business is conducted and saved over the internet. People can shop online for their products.

total revenue

Total amount earned by a business from the sale of its product

Total profit

Total amount of Money made after expenses have been paid

Calculate total profit

Total revenue-Total cost

Fixed cost

a cost that does not change, no matter how much of a good is produced

variable cost

a cost that rises or falls depending on the quantity produced

when the number of sellers increases, supply

increases

What are the stages of production

increasing returns, diminishing returns, and negative returns

Distinguish between the short run and long run.

A short run is a period so brief that only the amount of the variable input can be changed. A long run is a period long enough for the firm to adjust the quantities of all productive resources including capital.

When producers expectations in future price is increased supply is

Decreased

Distinguish between fixed cost and variable cost. Give three examples of EACH.

Fixed cost is what an organization includes even if there is little to no activity. It does not make a difference whether the business produces nothing, very little, or large amount. A variable cost is changes when a business rate of operation or output changes. Examples of fixed costs include salaries paid to executives, invest charges on bonds, and rent payments on leased properties. Examples of variable costs include wage-earning workers may be laid off, electric power to run machines, and freight charges to ship the final product.

If the total output of a business increases, what will happen to fixed costs? To variable costs?

If the total output increases then the fixed costs will stay about the same and the variable costs will increase or fluctuate with the total output.

When productivity is increased supply is what

Increased

When subsidies are increased supply is

Increased

When technology is increased supply is

Increased

If a firm takes longer to react to a change in price, then supply is likely ____________.

Inelastic

The _________________ is the result of the _________________________.

Law of supply Law of the increasing cost

Explain the relationship between marginal cost and total cost.

Marginal cost is the EXTRA cost incurred when producing one more unit of output and total cost is the sum of the fixed and variable cost.

As the quantity of a good produced rises, the ___________________________ rises.

Marginal opportunity cost

There is a __________________________ between price and quantity supplied.

Positive correlation

calculate total revenue

Price x total product

Identify the three stages of production. Describe what is happening to total product AND marginal product at each stage.

Stage 1- Increasing Marginal returns: The total product increases with each new worker hired. The second worker increases the marginal product more than the one before increasing production. Stage 2- Decreasing Marginal returns: The total output continues to increase but slower than the stage before. It increases at a diminishing rate. Marginal product becomes less than the marginal unit of the fifth worker. Marginal products are no longer positive after the tenth worker. Stage 3 Negative Marginal returns: This stage the total product begins to decrease. The marginal output begins to fall in the negatives so this also has a negative affect on the total output.

Supply

The amount of an economic product that would be offered for sale at all possible prices that could prevail in the market

using revenue terms and cost terms, define the break-even point for a firm. When should the company stop producing?

The break even point for a firm is when they can find a level of production that generates enough expenses to cover the operating costs. When the business has maximized the amount of the profits it can make, then they should stop producing.

You need to hire workers for a project and add one worker at a time to measure the added contribution of each worker. At what point will you stop hiring?

You want to keep hiring worker as long as you are still making profit. The moment that it cost you more to hire someone then it is making you money then you need to stop hiring workers

Calculate Marginal Revenue

change in Total Revenue/ Marginal product

Unit elastic supply

change in price equals change in quantity

inelastic supply

change in price is greater than change in quantity

Elastic Supply

change in quantity is greater than change in price

Calculate Marginal Cost

change in total cost / marginal product

marginal product

extra output due to the addition of one more unit of input

marginal revenue

extra revenue from the sale of one additional unit of output

Calculate Total Cost

fixed cost + variable cost

profit-maximizing output

level of production where marginal cost is equal to marginal revenue

Total product

total output produced by the firm