Econ Quiz 4
The main objective of a business in a market economy is
profit maximization.
Marginal ________ is the added revenue from producing and selling one more unit of output.
revenue
If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins?
$80
Inputs to production do NOT include
average product.
Output divided by the number of hours worked or by the number of workers is called
average product.
What word describes the goods and services that are used to produce outputs for a business?
Inputs
Theodore can make 6 pizzas in one hour. If Theodore's labor has a 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.
The total cost of production is determined by adding the costs of which of the following?
Labor, capital, land, intermediate inputs, and business know-how
_________ is the added cost to produce one more unit of output.
Marginal cost
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 lawn-mowing business where you have a push mower and labor as input, what would be the impact on output of adding an additional input in the form of a gas self-propelled mower (capital)?
Output would increase.
What name is given to the economic process of turning inputs into outputs that a business will sell to customers?
Production
What is the difference between revenue and cost?
Profit
What word describes the money that customers 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 and increases sales, what generally happens to revenue?
Revenue rises because the business is selling more output.
An example of variable costs is
hourly labor.
One strategy for long-term profit maximization is
innovation.
In a simple grass-mowing business, the lawn mower and the labor would be
inputs
The goods or services purchased by a business for immediate use in the production process are known as
intermediate inputs.
The hours of work supplied by various types of workers are referred to by economists as
labor
The price of labor per unit times the amount of labor used is called
labor cost.
Inputs used by a business in the production process include
labor.
Fixed costs are also 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.
The extra amount of output a business can generate by adding one more hour of labor is called
marginal product.
As the market price of a good rises, businesses will respond by producing more of that good because
marginal revenue exceeds marginal cost after the price increase.
A profit-maximizing business will increase production as long as
marginal revenue exceeds marginal cost.
The additional money a business gets from producing and selling one more unit of output is
marginal revenue.
Economists generally assume that the main goal of most businesses in the economy is to
maximize profits.
Businesses can raise their average product by investing in new equipment, by reorganizing work to be more efficient, or by
outsourcing labor.
The __________ summarizes the output of the business, given the level of inputs.
production function
Economists think of a business as a machine, where you put inputs in one end and get outputs from the other end. This metaphor is called the
production function.
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 everyday decision making.
In the process of long-term profit maximization, the business makes decisions under the assumption that it can
vary all the inputs.
Which of the following is an example of a profit-maximizing business?
An accountant who makes her living preparing tax returns for other people
In a simple lawn-mowing business where you have a push mower and labor as input, what would be the impact of adding an additional input in the form of a gas self-propelled mower (capital)?
Average product would rise, and marginal product would rise.
What word describes the money that a business pays for its inputs?
Cost
If June can earn $1,500 in revenue from painting two houses, how much can she earn in revenue from painting three houses? (Assume she is just one housepainter in a large market of housepainters, and that she can easily find a third customer.)
Exactly $2,250.
______ shows the potential cost for each level of output.
The cost function
The technology or knowledge necessary for a production process is called
business know-how.
marginal revenue exceeds marginal cost after the price increase.
businesses focus on achieving as much profit as they can, given that fixed costs 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.
The short-term cost function assumes that
fixed costs can't be changed.
If you add too many inputs, your business may experience
diminishing marginal product.
Many times, technology is ________the equipment a company buys.
embodied in