ECON MIDTERM II - DEFINITIONS & CONCEPTS

as input prices increase, the cost of producing each additional unit of output increases, leading to

a decrease in supply. an increase in marginal costs corresponds to a decrease (leftward shift) in supply

a price taker

a firm that has no influence over the price at which it sells its product

average variable costs is:

a firms variable cost divided by total output

the demand curve facing a firm in a perfectly competitive market is

a horizontal line at the equilibrium price

a market in which no individual seller has significant influence over the market price of a product is known as

a perfectly competitive market

technological innovations that decrease a firms marginal cost lead to

an increase in supply a reduction in marginal cost corresponds to a rightward shift in the supply curve (an increase in supply)

a factor of production is

an input used in the production of a good or service

a variable factor of production is

an input who quantity can be changed in the short run

the marginal cost curve passes through the minimum of the

average total cost curve average variable cost curve

the law of diminishing marginal returns states that increased production of the good eventually requires

ever-smaller increases in the variable factor - eventually increase

perfectly competitive market

firms can easily enter and exit the market all firms set the same standardized product

an input who quantity cannot be altered in the short run is a ____ factor of production

fixed

the sum of all payments made to the firms fixed factors of production is the firms

fixed cost

firms in perfectly competitive markets

have no control over price, and instead choose the level of output to maximize profit

Conditions under which firms will shutdown

if the firms revenue is less than the firms variable cost at all levels of output if price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost

A(n) _____ has at least some control over price

imperfectly competitive firm

Supply curves are upward sloping in part because as prices rise

individual suppliers already in the market will be willing to turn to more costly production techniques to supply more of the product. firms with a higher opportunity cost of producing the product will be willing to start supplying the product.

if a firms total revenue is greater than its total cost, then the firm

is profitable

as output changes from one level to another, the change in total cost divided by the corresponding change in output is the firms

marginal cost

for a firm that produces bread, which of the following is likely to be a factor of production? - ovens - bakers - money - flour

ovens, bakers, flour

producer surplus is the amount by which

price exceeds the sellers reservation price

if a firm is profitable, then at its profit maximizing level of output:

price is greater then average total cost (P>ATC)

supply will increase as the number of

sellers in the market increases an increase in the number of buyers in the market will lead to an increase in supply

average total cost is total cost divided by

total output

as prices _____, firms with a higher opportunity cost of producing a product will be willing to start supplying the product

rise