Ch.3 Econ

why is marginal cost rising

1.diminishing marginal product 2.rising input prices: buying more and more of an input increases the opportunity cost of that input

_______are a type of supplier who take the market price as given and just follow along.

Price-takers

Substitutes-in-production are

alternative uses of your production capacity.

A firm in a perfectly competitive market sets its price _____ the prices of its competitors because all firms are selling _____ product

as same as, an identical

fixed costs

costs that stay the same regardless of the quantity of output produced capital equipment, managers, buildings

How managers think about supply

how many gallons of gas should i supply -> marginal principle -> should I sell one more gallon -> cost-benefit principle -> depends on price marginal cost -> opportunity cost principle -> calculate marginal cost that includes variable costs, but not fixed costs -> implies -> rational rule for sellers supply one more gallon if price greater or equal to marginal cost

A(n) _____ in supply causes the supply curve to shift to the right where a(n) _____ in supply causes the supply curve to shift to the left.

increase; decrease

The factors that can change _____ will shift your supply curve

marginal costs

When your suppliers increase the prices of your inputs, they increase your _____, and this will shift your supply curve to _____.

marginal costs; the left

supply curves slope upward

price increases with quantity

Every business must choose what _____ to supply when the _____ changes.

quantity; price

individual supply curve

summarizes selling plans of a business

Variable Cost

that vary with the quantity of output produced wages, oil expenditures

When your firm is producing an additional unit, the marginal benefit to your firm is:

the amount of money your firm gets from selling the additional unit.

law of diminishing marginal product

the marginal product of an input declines as you use more of that input

law of supply

the quantity supplied is higher when prices are higher

The interdependence principle reminds us that

things other than price can influence your supply.

theory of supply is theory of marginal cost

your individual supply curve is your marginal cost curve