Chapter 4

The price of labor per unit times the amount of labor used is called

Labor cost

The total cost of production is determined by adding which of the following costs?

Labor, capital and land, intermediate inputs, and accumulating business know how

If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal cost, which the following could be the total cost of producing hundred muffins?

$80

One strategy for long-term profit maximization is

Innovation

Any simple grass mowing business, the lawn mower and labor would be

Inputs

What word describes the goods and services that are used to produce output for a business?

Inputs

The goods or services purchased by business for immediate use in the production process or known as

Intermediate inputs

Theodore can make six pizzas in one hour. If Theodore's labor has diminishing Marginal product, what must be true about the number of pizzas that Theodore can make in three hours?

It must be less than 18

Inputs used by business in the production process include

Labor

The hours of work supplied by various types of workers are referred to by economists as

Labor

If June can earn $1500 in revenue from painting two houses, how much can she earn in revenue from painting three houses?

Less than $2250

Fixed costs are known as_costs because they are much harder for a business to change

Long-term

The added expense of producing one more unit of output is called the

Marginal cost

_Is the added cost to produce one more unit of output

Marginal cost

The additional money a business gets from producing and selling one more unit of output is

Marginal revenue

The extra amount of output business can generate by adding one more hour of labor is called

Marginal revenue

_Is the added revenue from producing and selling one more unit of output

Marginal revenue

A profit maximizing business will increase production as long as

Marginal revenue exceeds marginal cost

As the market price of a good rises, businesses will respond by producing more of that good because

Marginal revenue exceeds marginal cost after price increases

Economists generally assume that the main goal of most businesses in the economy is to

Maximize profits

What happens to the marginal product of labor if more capital is added to a production process?

More capital Generally causes the marginal product of labor to rise

In a simple lawnmowing business where you have a push mower and labor as input, by adding an additional inputs in the form of a gas self-propelled mower, what would be the impact on output?

Output would increase

Average product is not as reliable indicator of how a business is doing as it used to be because of

Outsourcing labor

What is the economic process of turning inputs into outputs that a business will sell to consumers?

Production

Economists think of a business as a machine where you put in inputs in one end and get outputs from the other end. This metaphor is called the

Production function

The_summarizes the output of the business, given the level of inputs

Production function

What is the difference between revenue and cost?

Profit

The main objective of a business in a market economy is

Profit maximization

What word describes the money that consumers pay for the output of a business?

Revenue

_Is the amount of money a company receives for selling its product or service

Revenue

When a business expands production increases sales, what generally happens to revenue?

Revenue rises because the business is selling more output

Marginal cost generally_ quantity produced

Rises with

In short run profit maximization, businesses focus on the_, holding fixed costs constant

Short term cost function

Variable costs are also known as

Short term costs

Variable costs are relevant for

Short term every day decision making

In the process of long-term profit maximization, the business makes decisions under the assumption that it can

Vary all inputs

What word describes the money that a business pays for its inputs?

Cost

The short term cost function assumes that

All variable costs are equal

Which of the following is an example of a profit maximizing business?

An accountant who makes a living preparing tax returns for other people

Inputs to production do not include

Average product

Output divided by the number of hours worked or by the number of workers is called

Avery's product

The technology or knowledge necessary for the production process is called

Business know how

The Difference between long-term and short-term profit maximization is that in the short term,

Businesses focus on achieving as much profit as they can, given that fixed cost cannot be changed

The long lived physical equipment and structures that a business uses in its production process are called

Capital

Profit is the difference between revenue and

Cost

If you add too many inputs, your business may experience

Diminishing marginal product

Many times technology is _ in the equipment a company buys

Embodied

And example of variable costs is

Hourly labor

_Shows the potential cost for each level of output

The cost function