econ midterm ch 8

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TOTAL PROFIT (formula)

(P-ATC) x Q

When the marginal product of labor rises

the marginal cost of production falls.

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.

Average fixed costs of production

falls as long as output is increased.

FC

fixed cost

Q

output/quantity

The long run average cost curve shows

the lowest average cost of producing every level of output in the long run.

How are implicit costs different from explicit​ costs?

An explicit cost is a cost that involves spending​ money, while an implicit cost is a nonmonetary cost.

TC (formula)

FC + VC

AFC(formula)

FC/Q

What is the difference between the short run and the long​ run?

In the short​ run, at least one of a​ firm's inputs is​ fixed, while in the long​ run, a firm is able to vary all its inputs and adopt new technology.

Which of the following is true at the output level where average total cost is at its​ minimum?

Marginal cost equals average total cost.

TR (formula)

P x Q

PROFIT PER UNIT OF OUTPUT (formula)

P-ATC

ATC (formula)

TC/Q or AFC+AVC

PROFIT(formula)

TR-TC

AR(formula)

TR/Q

AVC(formula)

VC/Q

VC(formula)

WAGE x # OF WORKERS

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 greater than the average product of​ labor, the average product of labor must be increasing

The marginal cost of production shows the change in a​ firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost​ curve? ​Graphically, the marginal cost curve is

a U​ shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

AFC

average fixed cost

AR

average revenue

ATC

average total cost

AVC

average variable cost

Economies of scale occur when

a​ firm's long−run average total costs fall as it increases the quantity of output it produces.

MC

marginal cost

MPL

marginal product of labor

MR

marginal revenue

Long run costs are U−shaped because

of economies and diseconomies of scale.

P

price

Which of the following is an implicit cost of​ production?

rent that could have been earned on a building owned and used by the firm.

Technology is

the processes a firm uses to turn inputs into outputs of goods and services.

TC

total cost

Which of the following cost will not change as output​ changes?

total fixed cost

TR

total revenue

VC

variable cost

Suppose that last semester your semester GPA was 3.9 and your resulting cumulative GPA was 2.85 Next, suppose that this semester your semester GPA will be 3.2 If​ so, then your cumulative GPA

will increase because your​ "marginal" GPA will be above your cumulative GPA.

MC (formula)

∆TC/∆Q

MR(formula)

∆TR/∆Q


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