Econ Quiz 4

The main objective of a business in a market economy is

profit maximization.

Marginal ________ is the added revenue from producing and selling one more unit of output.

revenue

If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins?

$80

Inputs to production do NOT include

average product.

Output divided by the number of hours worked or by the number of workers is called

average product.

What word describes the goods and services that are used to produce outputs for a business?

Inputs

Theodore can make 6 pizzas in one hour. If Theodore's labor has a diminishing marginal product, what must be true about the number of pizzas that Theodore can make in three hours?

It must be less than 18.

The total cost of production is determined by adding the costs of which of the following?

Labor, capital, land, intermediate inputs, and business know-how

_________ is the added cost to produce one more unit of output.

Marginal cost

What happens to the marginal product of labor if more capital is added to a production process?

More capital generally causes the marginal product of labor to rise.

In a simple lawn-mowing business where you have a push mower and labor as input, what would be the impact on output of adding an additional input in the form of a gas self-propelled mower (capital)?

Output would increase.

What name is given to the economic process of turning inputs into outputs that a business will sell to customers?

Production

What is the difference between revenue and cost?

Profit

What word describes the money that customers pay for the output of a business?

Revenue

________ is the amount of money a company receives for selling its product or service.

Revenue

When a business expands production and increases sales, what generally happens to revenue?

Revenue rises because the business is selling more output.

An example of variable costs is

hourly labor.

One strategy for long-term profit maximization is

innovation.

In a simple grass-mowing business, the lawn mower and the labor would be

inputs

The goods or services purchased by a business for immediate use in the production process are known as

intermediate inputs.

The hours of work supplied by various types of workers are referred to by economists as

labor

The price of labor per unit times the amount of labor used is called

labor cost.

Inputs used by a business in the production process include

labor.

Fixed costs are also known as __________ costs because they are much harder for a business to change.

long-term

The added expense of producing one more unit of output is called the

marginal cost.

The extra amount of output a business can generate by adding one more hour of labor is called

marginal product.

As the market price of a good rises, businesses will respond by producing more of that good because

marginal revenue exceeds marginal cost after the price increase.

A profit-maximizing business will increase production as long as

marginal revenue exceeds marginal cost.

The additional money a business gets from producing and selling one more unit of output is

marginal revenue.

Economists generally assume that the main goal of most businesses in the economy is to

maximize profits.

Businesses can raise their average product by investing in new equipment, by reorganizing work to be more efficient, or by

outsourcing labor.

The __________ summarizes the output of the business, given the level of inputs.

production function

Economists think of a business as a machine, where you put inputs in one end and get outputs from the other end. This metaphor is called the

production function.

Marginal cost generally ________ quantity produced.

rises with

In short-run profit maximization, businesses focus on the ______, holding fixed costs constant.

short-term cost function

Variable costs are also known as

short-term costs.

Variable costs are relevant for

short-term everyday decision making.

In the process of long-term profit maximization, the business makes decisions under the assumption that it can

vary all the inputs.

Which of the following is an example of a profit-maximizing business?

An accountant who makes her living preparing tax returns for other people

In a simple lawn-mowing business where you have a push mower and labor as input, what would be the impact of adding an additional input in the form of a gas self-propelled mower (capital)?

Average product would rise, and marginal product would rise.

What word describes the money that a business pays for its inputs?

Cost

If June can earn $1,500 in revenue from painting two houses, how much can she earn in revenue from painting three houses? (Assume she is just one housepainter in a large market of housepainters, and that she can easily find a third customer.)

Exactly $2,250.

______ shows the potential cost for each level of output.

The cost function

The technology or knowledge necessary for a production process is called

business know-how.

marginal revenue exceeds marginal cost after the price increase.

businesses focus on achieving as much profit as they can, given that fixed costs cannot be changed.

The long-lived physical equipment and structures that a business uses in its production process are called

capital.

Profit is the difference between revenue and

cost.

The short-term cost function assumes that

fixed costs can't be changed.

If you add too many inputs, your business may experience

diminishing marginal product.

Many times, technology is ________the equipment a company buys.

embodied in