ECON 201 CHP 13 & 14

the total cost to the firm of producing zero units of output is?CHP 13

it is fixed cost in the short run and zero in the long run

example of outputs?

pizza

what is the term production?

transformation of resources ( inputs) into goods or services (outputs)

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then CHP14

a one-unit increase in output will increase the firms' profit. - profit will increases with Q

Refer to scenario 13-3: Tony's economic profit equals?CHP 13

$-80 Economic profit = 300-380=(-80)

Refer to figure 14-6: when 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market? CHP14

$1.50 Firms quantity = 15,000/100=150

Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? CHP14

$10 and 100 MR =P=AR TR= 1,000 = P*Q=10 Q= 1000/10=100

Refer to Table 13-12: what is the marginal cost of the 2nd cakes at Betty's bakery? CHP 13

$15 MC= TC above and below minus.

Refer to scenario 13-3: Tony's accounting profit equals? CHP 13

$170 Accounting profit=300-130=170

Refer to Table 13-12: what is the average variable cost of producing 6 cakes at Betty's bakery? CHP 13

$18 AVC=VC/Q

Refer to Table 13-12: What is the fixed cost of production at Betty's bakery? CHP 13

$25 FC=TC-VC

Refer to Table 13-12: what is the average fixed cost of producing 8 cakes at Betty's bakery? CHP 13

$3.13 AFC=FC/Q

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00. what would be the firms total revenue if it instead produced and sold 4 units of output? CHP14

$32.00 P=8 TR=P*Q= 8*4 = 32

Refer to scenario 13-3: What is the total opportunity cost of the day that Farmer Tony incurred for hhis spring day in the field planting wheat? CHP 13

$380 TC= explicit cost +25 * 10hr= 130+250=380

Refer to Table 13-12: What is the total cost of producing 2 cakes at Betty's bakery? CHP 13

$53 TC= FC+VC

Refer to Table 13-12: What is variable cost of producing 5 cakes at Betty's bakery? CHP 13

$85 VC=TC-FC, 110-25=85

Refer to figure 14-6: if there are 200 identical firms in this market, what level of output will be supplied to the market when price is $1.00? CHP14

20,000 market quantity = firms quantity * # of firms = 100*200= 20,000

How to calculate total revenue

Price x Quantity

refer to table 14-5: This table provides information on a firms output, marginal revenue, and marginal cost for a firm. If the firm is maximizing profit, how much profit is it earning? CHP14

There is insufficient data to determine the firms profit. -no info on FC

what is the term marginal cost?

additional cost of the last unit of a good

Marginal cost tell us the? CHP 13

amount by which total cost rises when the output is increased by one unit

entry into a market by new firms will? CHP14

increase the supply of the good.

what is the term fixed cost?

cost that does not vary with the output level ex: rent of building

what is the term variable cost?

cost that varies with the output level ex: wages for part time workers

what is the term explicit cost?

cost with outlay of money ex: purchase of materials

what is the term implicit cost?

cost without outlay of money ex: forgone interest

When new firms enter a perfectly competitive market, CHP14

existing firms may see their cost rise as more firms compete for limited resources.

Refer to Figure 13-9: The three average total cost curves on the diagram correspond to three different?CHP 13

factory sizes

how to calculate total cost

fixed cost + variable cost

Which of the following would be categorize as an implicit cost?CHP 13

forgone investment opportunities.

Refer to Figure 13-9: the firm experiences economies of scale if it changes its level of output? CHP 13

from Q1 to Q2 Profit= TR-TC TR= Profit + TC

what is the term production function?

graph of relationship between input and output

refer to table 14-5: This table provides information on a firm's output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do? CHP14

increase quantity to 16 units MC<MR= profit increases w/ quantity

economists normally assume that the goal of a firm is to?CHP 13

maximize profit

If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in panel (b) is most likely to reflect long-run market strategy. CHP14

the idea that free entry and exit of firms in the market lead to only one market price in the long run.

in a perfectly competitive market, the horizontal sum of all the individual firms' supple curves is ? CHP14

the market supply curve

what is the term diminishing marginal product

the product whereby the marginal product of an input declines as the quantity of the input increases

When price is greater than marginal cost for a firm in a competitive market? CHP14

there are opportunities to increase profit by increasing production. P>MC =profit increase w/ Q

example of inputs?

tomato , wheat, cheese, salt, oven, table

which of the following can be added to profit to obtain total revenue?CHP 13

total cost

how to calculate economic profit?

total revenue - total cost