Chapter 9 & 10 economics

true if the loss is less than the fixed cost.

"Even if a firm is losing money, it may be better to stay in business in the short run." This statement is

is really in the long run.

A firm with no fixed cost

this is the amount required to ensure continued supply of the product.

A normal profit is considered a cost because:

TR exceeds TC by as much as possible.

A purely competitive firm whose goal is to maximize profit will choose to produce the amount of output at which:

This is the amount required to ensure continued supply of the product. *Find this by dividing the Total Product / Labor units.

Average Product

Raises when its less than the marginal product.

Average product in a graph:

No, the firm will want to shut down.

Consider a firm that has no fixed costs and which is currently losing money. Are there any situations in which it would want to stay open for business in the short run?

inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self-owned resources such as foregone income.

Explicit costs are payments the firm makes for:

Any cost that in total does not change when the firm changes its output.

Fixed cost

may be temporary until the price of the product increases.

If a firm's current revenues are less than its current variable costs and it decides to shut down, this decision

immediately

If a firm's current revenues are less than its current variable costs, it should shut down?

$300; negative $100

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda's accounting profit is _____________ while her economic profit is ______________.

The extra output or added product associated with adding a unit of a variable resource, in this case labor, to the production process *Find this by dividiing the change in total product/ change in labor input

Marginal Product

the slope of the total-product curve in graph (a) is zero.

Marginal Product in a graph is zero when:

A horizontal line at 2 cents per paper clip.

Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is:

last unit produced adds more to revenue than to costs, and its production must necessarily increase profits or reduce losses.

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because when this is true the:

tuition costs and the cost of books, whereas the implicit costs include foregone income.

The explicit costs of going to college include:

false

True or false. The U shape of the long-run ATC curve is the result of diminishing returns.

produces ideal results in terms of low-cost production and allocative efficiency, and can be used as a basis of comparison.

We study pure competition because it:

this is the amount required to ensure continued supply of the product.

What is the total product?

the demand curve is perfectly elastic and the price is constant regardless of the quantity demanded, so the MR is constant and equal to the price.

When an industry is purely competitive, price can be substituted for marginal revenue in the MR = MC rule because

Fixed costs include insurance and variable costs include gasoline.

Which of the following statements is true regarding the costs associated with owning and operating an automobile?

A) Accounting profit equals sales revenue minus explicit costs.

Which of the following statements is true? A) Accounting profit equals sales revenue minus explicit costs. B) Normal profit equals sales revenue minus implicit costs. C) Economic profit equals the opportunity cost. D) Accounting profit gives a true measure of the opportunity cost of the current business venture.

the variable cost of the trip, the opportunity cost of time, and the need for transportation in Florida.

You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. In making your decision you should consider:

pure competition

involves a very large number of firms producing a standardized product (that is, a product like cotton, for which each producer's output is virtually identical to that of every other producer.) New firms can enter or exit the industry very easily.

oligopoly

involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output.

Pure monopoly

is a market structure in which one firm is the sole seller of a product or service (for example, a local electric utility).