Econ-201 (13,14,15,16)

efficient scale of production

lowest point on average total cost curve

Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. In producing the 7,000 pounds of cheese, the firm's average fixed cost was

$1.71

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. At Q = 999, the firm's total costs equal

$24,980

Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. How much profit will the museum earn if it engages in price discrimination?

$800

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will fall even further next semester if he performs worse than (i) his cumulative GPA. (ii)he ever performed before. (iii)he did last semester.

(i) and (ii) only

average variable cost

(total cost-fixed cost)/ quantity of output

marginal product

+1 unit of output example: when the number of workers goes from 1 to 2, cookies made goes from 50 to 90, so the marginal product of the worker #2 is 40 cookies

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

False

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Jose's restaurant should shut down immediately.

calculate profit

Revenue - cost

Suppose that for a particular business there are no implicit costs. Then

accounting profit will be the same as economic profit.

diminishing marginal product

as the number of workers increases, the marginal product declines *less access to equipment due to the # of workers

The firm's efficient scale is the quantity of output that minimizes

average total cost

total cost

average total cost x quantity - marginal cost

competitive market

basic items wheat, corn, water, milk NO BRAND LOYALTY

monopolist

buyers have market power i.e. walmart negotiates with vendors

Marginal revenue for a monopolist is computed as

change in total revenue per one unit increase in quantity sold.

economic profit

count foregone income as a cost because it will affect the decisions the firms make in their business =total revenue - all opportunity costs of producing the goods and services sold

When firms are neither entering nor exiting a perfectly competitive market,

economic profits must be zero.

explicit cost

direct outlay for factors of production

implicit cost

do not involve direct money outlay *implicit cost of almost ever business is the money invested into it

variable cost

does change as the firm alters the quantity of output provided

fixed cost

does not change or vary with quantity of output produced

the typical demand curve for a monopoly is

downward sloping

excess capacity

gap between efficient scale of production and output bad to society doesnt offset anything

opportunity cost of owning a business

interest on the bank loan + the forgone interests on savings

maximize profits

marginal revenue= marginal cost

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

Which of the following is an example of a monopolistically competitive industry?

movies

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

no economic profit since it is charging a price equal to it average total cost.

oligopoly

only a few firms selling in a noncompetitive market (less than 10) i.e. people call AT&T and tell them they can get a beller deal at verizon and AT&T lowers their price

accounting profit

only measure explicit costs =firms total revenue - firms explicit costs

Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is

perfectly elastic

horizontal line on the graph

perfectly elastic

maximize price

take quantity where marginal revenue is equal to marginal cost and go up all the way till you reach the demand curve and find the number on the price axis.

as long as average total cost is greater than average variable cost

the firm can stay in business.

when price and average total cost is the same

the firm is making zero economic profit

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost

the firm may be incurring economic losses

price is always greater than marginal cost

true

total cost on a graph

where ATC meets MC

Based upon the information shown, how many units will Bearclaws produce to maximize profits?

where marginal revenue meets marginal cost