ch 13 terms

If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then

average product is rising

If the price that a firm charges is lower than its ___________ of production, the firm will suffer losses.

average total cost

public good

good that is nonexcludable and non-rival and thus is difficult for market producers to sell to individual consumers

In economics, the term "shutdown point" refers to the point where the

marginal cost curve crosses the average variable cost curve.

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then

marginal cost is below average fixed cost

Under perfect competition, any profit-maximizing producer faces a market price equal to its

marginal costs

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached

only allocative efficiency

Firms operating in a market situation that creates ___________ sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition

In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that

the average product of labor is always equal to the marginal product of labor.

private benefits

the benefits a person who consumes a good or service receives, or a new product's benefits or process that a company invents that the company captures

intellectual property

the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions

If a firm's revenues do not cover its variable costs (Revenue<VC), then that firm has reached its

shutdown point.

social benefits

sum of private benefits and external benefits

For a perfectly competitive firm, the marginal cost curve is identical to the firm's

supply curve

free rider

those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided

nonexcludable

when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it

private rates of return

when the estimated rates of return go primarily to an individual; for example, earning interest on a savings account

social rate of return

when the estimated rates of return go primarily to society; for example, providing free education

Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. The market for cinnamon is competitive and the prevailing price is $2 per cinnamon bun. (In other words, Neil is a price taker and can only sell the product at $2 per unit.) The table below shows how many cinnamon buns Neil can sell, depending on the number of workers he hires. Assume that Neil's only choices are to hire 1 worker, or 2 workers, or 3 workers, or 4 workers, or 5 workers. (Each hired worker will work their full 8 hour shift.) #15

3 workers

In perfectly competitive markets, why are producers price takers?

Because there is a very high degree of similarity to competitor's products.

positive externality

beneficial spillover to a third party or parties

external benefits (positive externalities)

beneficial spillovers to a third party of parties, who did not purchase the good or service that provided the externalities

nonrivalrous

even when one person uses the good, others can also use it

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output,

expanding output levels at any given price will result in higher profit

___________ refers to the additional revenue gained from selling one more unit.

marginal revenue

Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its #13

marginal revenue is constant