Microeconomics chapter 7&8

the quantity of output

In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

total revenue

is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. must exceed total costs to earn profit

marginal cost

cost per additional unit MC= change in total cost/ change in quantity

short run

the time period during which at least some factors of production are fixed

marginal product

the additional output of one more worker

marginal revenue

the additional revenue gained from selling one more unit. MR= change in total revenue/ change in quantity

diseconomies of scale

the long run average cost of producing each individual unit increases as total output increases.

Long run

the period of time during which all factors are variable

economies of scale

describes a situation where the quantity of output rises, but the average cost of production decreases

many buyers and sellers, identical products, informed buyers and sellers, free market entry and exit

4 criteria for perfect competition

decreasing returns of scale

a firm or factory can grow so large that it becomes very difficult to manage and run efficiently, what happens in this situation?

monopoly

a firm that faces no competitors is referred to as _____

fixed costs

consists of expenditures that must be made before production starts

variable inputs

factors of production that a firm can easily increase or decrease in a short period of time

Fixed inputs

factors of production that cannot be easily increased or decreases in a short period of time

perfect competition

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

allocative efficiency

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 ____

shutdown point

if a firms revenues fo not cover its average variable costs, then that firm has reached its ____

Variable costs

if a paper mill shuts down its operations for three months so that it produces nothing. its ___ will be reduced to zero

average profit

if the market price is > than average cost then the ______ will be positive. vis versa = price-average cost

average cost

if the price that a firm charges is lower than its ____ of production, the firm will suffer losses

how much to produce

in a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make, what is it?

price taker

in a perfectly competitive market, a firm must take the prevailing market prices. The firm is referred to as the

increasing returns to scale

in microeconomics, the term ____ is synonymous with economies of scale

average costs

in order to determine ____ the firms total costs must be divided by the quantity of its output

variable costs

include all the costs of production that increase with the quantity produces

average total cost

total cost divided by the quantity of output