Econ midterm 2
If a perfectly competitive firm's total revenue is less than its total variable cost, the firm
should stop production by shutting down temporarily.sh
If the market price is $25, the average revenue of selling five units is
$25
short run
A period of time in which at least one of the firm's inputs is fixed. The fixed inputs cannot be adjusted. In the short run only variable inputs can be adjusted (same amount of time for the tennis ball activity)
law of diminishing returns
At some point, adding more of a variable input (laborers )to the same amount of a fixed input (kettles) will cause the marginal product of the variable input to decline that at someth point, adding more of a variable input to a given amount of a fixed input, will cause the marginal product of the variable input to decline.
Which of the following is an example of positive technological change?
A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.
Jennifer Borts moves her office from the premises she rents at a local mall to her home. As a result of this move
Jennifer's explicit costs fall and her implicit costs rise.
After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker the average product of labor declines. Which of the following statements must be true?
The marginal product of the 8th worker is less than the average product of labor before the 8th worker was hired. Th
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 less than the average product of labor, the average product of labor must be decreasing.
long run
The period of time in which a firm can vary ALL of its inputs. No inputs are fixed, the firm can adopt new technology, add assets like machinery, and increase or decrease the size of its physical plant
explicit cost
a cost that involves spending money
implicit cost
a non-monetary opportunity cost "For example, an employee could take a vacation and travel. The explicit costs would include travel expenses, the cost of a hotel room, and costs related to entertainment. The implicit costs relate to the tradeoff, namely the wages that the employee could have earned if the vacation was not taken"
A buyer or seller that is unable to affect the market price is called
a price taker
A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm
a price taker
Further, positive technological change is defined as
being able to produce more output using the same inputs and being able to produce the same output using fewer inputs.
The marginal product of labor is calculated using the formula
change in Q/change in L
variable costs
costs that can vary or change. examples of inputs with variable costs are workers (labor) and raw materials
fixed costs
costs that remain constant. examples of inputs with fixed costs includes facilities, insurance, machinery
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.ec
When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm
experiences positive technological change
marginal product of labor
how much the "last worker" added to the total output
Ted's Pancake Kitchen suffers a shortminusrun loss. When should Ted decide to shut down rather than continue to produce?
if his Pancakeif Kitchen's revenue is less than its variable costs
The long run refers to a time period
long enough for a firm to vary all of its inputs, to adopt new technology and change the size of its physical plant.
technology change
more outputs with the same inputs or the same output with fewer inputs example: The telephone is an example of a product that has undergone a technological change. It has undergone many different changes over the years that have made it more efficient. Processes or products, such as the telephone, move through technological change in three stages:
The marginal product of labor is defined as
the additional output that results when one more worker is hired, holding all other resources constant.
total costs
the cost of all the inputs a firm uses in production
The production function is the relationship between
the inputs employed by a firm and the maximum output it can produce with those inputs.th
In economics, the best definition of technology is
the process a firm uses to turn inputs into outputs.
production function
the relationship between a firms inputs and outputs This production function says that a firm can produce one unit of output for every unit of capital or labor it employs.
The basic activity of a firm is
to use inputs to produce outputs of goods and services
Average total cost is
total cost divided by quantity
Which of the following cost will not change as output changes?
total fixed costs
perfectly competitive market
unable to affect market price, many buyers and sellers, identical products,
