us economy : review ?'s unit 2

the tools machinery infrastructure and knowledge used to produce goods and services are classified as the resource ______

capital

in the long run perfectly competitive firms achieve ______ efficiency by producing at the lowest cost and ______ efficiency by producing what consumers want

- productive - allocative

total profit equals (______ revenue minus ______ total cost) multiplied by output

- average - average

in addition to total cost it is useful to calculate average cost because

- average cost numbers are more usable for managing - average cost can be compared directly to the price

in ______ cost industries the cost of production ______ with expanded output and the long run market supply curve slopes downward

- decreasing - decreases

the average ______ cost always declines with additional output while the average ______ and average ______ costs decline and then increase

- fixed - variable - total

when discussing employment or demand and supply of labor in the labor market ______ supply labor and _____ demand labor

- households - firms

determine if cost is explicit or implicit - you don't pay yourself a salary but you could be earning $50,000 - operate your business in a corp that you own --- the corp pays your salary of $40,000 each year - local organic farm also has a restaurant on its premises and all the vegetables used in its melas come from its own farm - manager of a startup company assigns an employee task of training a new team member within his daily working duration of 8 hours - your electric bill was $60 per month before you started your own business now it's $150 per month

- implicit - explicit - implicit - implicit - explicit

through advertising and branding monopolistically competitive firms increase the demand for their products and make those demands relatively more ______ allowing them to charge higher ______ and generate ______ economic profits

- inelastic - prices - higher

for a monopoly the ________ revenue curve is located below the _________ curve

- marginal - demand

for a perfectly competitive firm the market price is equal to

- marginal revenue - average revenue - demand

determine whether the market level of output is likely to be more or less than the efficient level of output - producing electricity with coal - public education - recycling - driving an electric vehicle - rifle range

- more - less - less - less - more

determine whether the market level of output is likely to be more or less than the efficient level of output - noisy parties - home improvements - protective gear used in sports - coal fired electrical plants

- more - less - less - more

what are the characteristics of a contestable firm

- no real barriers to entry - a single firm

when a ______ externality exists the socially optimal level of output will be greater than that resulting from a ______ market

- positive - private

economies of scale can result from a variety of factors including

- productivity gains from more specialized labor - lower costs of inputs as firms purchase larger quantities

in the circular flow model the two markets are the ______ market and the ______ market

- resource - product

profit equals (average ______ minus average total ______) multiplied by output

- revenue - cost

A number of entry barriers are present in oligopolistic markets including

- significant costs of capital - patents - pricing strategies - economies of scale that may allow only a small # of firms to operate in a market - control of the resources needed to produce output

in the market for labor households are on the ______ side and firms are on the _____ side

- supply - demand

when there are positive externalities govts intervene in the marketplace to stimulate demand toward the socially efficient level through

- tax credits - subsidies

a market failure occurs when

- the market does not produce an output level that maximizes total surplus

in a perfectly competitive market homogeneity means that firms must change the market price for the good or the services they produce bc

- there are 100s of other perfectly good substitutes - the market is competitive

the market produces the right goods in the correct amounts using the fewest resources possible when

- there is allocative efficiency - there is productive efficiency

total ______ costs change with output whereas total ______ costs do not

- variable - fixed

by charging consumers the highest price they are willing and able to pay the pure monopoly

- yields higher profits than any other pricing method available to the firm - extracts all surplus from consumers

the marginal revenue product associated with hiring one additional worker is _____

a downward sloping line similar to the marginal product

the long run is

a period of time in which all inputs of production are variable

total revenue minus the explicit cost of production is ______ profit

accounting

by responding to changes in market price competitive firms produce more of the products we value most and fewer of the products we value least thereby achieving

allocative efficiency

bc the marginal revenue faced by the firm is equal to price ______ revenue is also equal to price

average

the amount of output produced per unit of a resource employed is the ______ product

average

total product divided by the number of units of a resource employed gives the _______ product of the resource

average

when the marginal cost falls below the average cost the ______ cost should be decreasing

average

the vertical distance between the average variable cost and the average total cost curves gets smaller as more output is produced because this distance is equal to

average fixed cost, which declines as output increases

total cost per unit is equal to

average total cost = total cost/quantity or average fixed cost + average variable cost

the short run supply curve starts at the minimum

average variable cost

total variable cost divided by the amount of output produced is equal to

average variable cost = total variable cost/quantity

the efficiency loss resulting from a monopolistic market is called a

dead weight loss

as the market price decreases all else held constant a profit maximizing firm will ______ its production

decrease

if a monopoly wants to sell more units it must ______ the price for every unit it sells

decrease

the optimal level of resource utilization increases when the marginal resource cost _______

decreases

in competitive labor markets the wage depends on the _____ and ____ of labor

demand and supply

when consumers are relatively sensitive to changes in price

demand is considered elastic

if a business owner can produce more as a whole with an additional worker even if the marginal product associated with that worker is lower than the marginal product associated with the previous worker then there are

diminishing marginal returns

explicit cost are also known as ______ costs

direct

______ of scale is a condition in which the long run average total cost of production increases as production increases

diseconomies

total revenue minus the explicit and implicit costs of production is ______ profit

economic

if selling another unit of output increases revenue demand is

elastic

the marginal resource cost curve for the firm will NOT shift if

employees fully pay for higher resource costs

the marginal resource cost curve for the firm will shift if

employers pay for part of or all higher resource costs

bc the cost of a container is proportional to its surface area by doubling the diameter of a container a producer can

experience economies of scale

such efforts as pollution controls taxes regulation the enforcement of property rights and cleanliness standards all can help minimize ______ costs and move toward the efficient outcome

external

______ occur when property rights are not clearly defined

externalities

markets characterized by either + or - ______ may result in an inefficient outcome

externalities

one of the justifications for govt intervention in markets is the potential to improve on the market outcome in markets characterized by

externalities

the marginal cost is the

extra or additional cost associated with the production of an additional unit of output

what is a way that firms can avoid paying fixed costs in the short run

firms cannot avoid fixed costs in the short run

in perfect competition in terms of influence

firms cannot influence the market price with production decisions

a perfectly competitive firm will incur its total ______ cost of production when it shuts down temporarily in the short run

fixed

total cost equals total ______ cost plus total variable cost

fixed

the union negotiated wage is a price ______ in the market for the union members' labor

floor

as the market price ______ all else held constant a profit maximizing firm can afford to expand its production

increases

the shape of the marginal cost curve is dependent on the

law of diminishing marginal returns

a curve showing the ______ average total cost possible for any given level of output when all inputs of production are variable is the long run average cost curve

lowest

increasing ______ returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource

marginal

social ______ cost is the cost to society of producing an additional unit of a good or service

marginal

the additional output produced as a result of utilizing one more unit of a variable resource is the ______ product

marginal

the change in total product associated with hiring an additional worker is called

marginal product

a profit maximizing firm should produce a level of output where

marginal revenue equals marginal cost

the resource demand curve is represented by the

marginal revenue product curve

profit ______ implies that monopoly firms should expand production up to the point where the marginal revenue equals the marginal cost

maximization

the level of profit that occurs when total revenue is equal to total cost is known as

normal profit

the equilibrium output produced by an ______ firm is neither allocatively nor productively efficient

oligopolistic

______ cost is the cost of the next best alternative that is foregone

opportunity

average fixed cost always declines as a firm produces more

output

when externalities exist

outside intervention may be able to improve the market outcome, increasing efficiency and economic surplus

a ______ externality is the unpaid benefit of an activity that is enjoyed by a third party

positive

in the short run as the ______ rises so does the level of output supplied

price

in a perfectly competitive market the price the firm should charge is the market price bc the firm is a

price taker

social supply is the supply of a good or service that reflects both the ______ and ______ costs of production

private and external

by charging consumers the highest price they are willing and able to pay the pure monopoly extracts all surplus from consumers yielding higher ______ than any other pricing method available to the firm

profits

the marginal revenue product curve also represents the ______ demand curve

resource

all perfectly competitive firms maximize profits by producing the quantity of output at which the marginal ______ is equal to the marginal cost

revenue

a period of time in which at least one input of production is fixed is known as the

short run

when it shuts down temporarily in the short run a perfectly competitive firm

still incurs its total fixed costs

when the total revenue earned by a firm is less than the total cost of production

the firm faces a loss

changes in variable costs of resources will affect

the marginal costs faced by firms

suppose that market conditions change in a area and as a result a firm faces a decrease in the cost of each additional worker it hires

the marginal revenue cost curve shifts downward

being able to calculate ______ product average product and marginal product is important to operate efficiently and maximize profits

total

the total amount of output produced with a given amount of resources is known as

total product

the price of a good times the number of units sold gives us

total revenue

the price of a good times the quantity sold equals

total revenue

what is NOT an entry barrier in oligopolistic markets

upward sloping long run marginal cost curve

if the market price is below the AVC the business is not bringing in enough revenue to compensate for the ______ costs

variable

costs that change with the amount of output produced are

variable costs