Economics Ch.5 Study Guide

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Fixed cost

costs that business owners incur no matter how much they produce

Variable Cost

costs that depend on the level of production cost

Total cost is the sum of...

fixed costs and variable costs

The difference between fixed costs and variable costs is that...

fixed costs remain the same; variable costs depend on how much is produced

The additional expense of producing one more unit of a product is called...

marginal cost

The change in total output that results from hiring one additional worker is called...

marginal product

Profit-maximizing output is the point at which...

marginal revenue and marginal cost are equal

Which of the following examples demonstrates elastic supply?

A CD fails to be hit, stores discount it by 30 percent, and the recording company lowers production by 50 percent.

Which of the following is an example of input costs affecting supply?

A toy maker reduces production because the price of lead-free paints rises

Which of the following is an example of supply?

Ann has a commercial oven and bakes wedding cakes for friends

Which of the following is an example of producer expectations affecting supply?

As oil prices rise, a bicycle factory increases production levels

An ice cream shop surveyed its customers about how many scoops they would buy at different prices. The owner wants to put the information in a format that will visually show the overall pattern. What should she do?

Draw a market supply curve

What happens when businesses hire too many workers?

Employees get in each other's way, causing disorganization and inefficiency

Why do businesses want to know what their profit-maximizing output is?

It is the point at which each unit produced is earning the highest possible profit

According to the law of​ supply, what happens when prices increase?

Quantity supplied increases

A small grocery store makes several technological changes. Which one will improve labor productivity?

Replace old cash registers with UPC scanners.

Which of the following is a fixed cost for a steel mill?

The chief financial officer is paid a salary

Profit-Maximizing Output

The point at which a business has reached its highest level of profit

Which of the following government regulations is most likely to help increase supply?

Workers safety on construction sites is strengthened

Why do small businesses often become more efficient when they add workers?

Workers specialize and divide tasks

Total Revenue

a company's income from selling its products

What is an excise tax?

a tax on the production or sale of specific goods or services

What is the most likely outcome when the number of producers of a particular product rises?

an increase in supply

The appearance of a supply curve is...

an upward slope, bottom left to top right

Car manufacturers who use robots to do certain jobs on the assembly line are trying to increase supply by...

applying new technology

What do the difference points along a supply curve show?

changes in quantity supplied

The government uses excise taxes to...

decrease the supply of products it doesn't want people to use

Which of the following lists contain only variable costs for an automobile factory?

electricity to run drills, wages, windshields

Which of the following are examples of government actions?

excise tax, regulation, subsidy

Specialization

having a worker focus on a particular aspect of production

The ease of changing production to respond to price change determines

how elastic a supply is

The amount of goods and services that a person can produce in a given time is called...

labor productivity

Supply curves are created using the assumption that all economic factors remain constant except...

price

Elasticity of supply measures how responsive...

producers are to price change

What motivates producers to increase supply?

profit

Business owners decide on the right number of workers by analyzing data to learn when...

profit-maximizing output is reached

According to the law of supply, when prices increases,

quantity supplied increases

What is it called when government controls business behavior through rules or laws?

regulation

What do both elasticity of demand and elasticity of supply measure?

responsiveness to price

Economists use a supply curve to...

show the law of supply in graph form

The desire and ability to produce and sell a product is...

supply

A supply schedule is a...

table showing how much of a product someone is willing and able to sell

Marginal Product

the change in total output brought about by adding one additional

What is the most common reason for supply to be inelastic?

the difficulty of changing the amount produced

Marginal costs

the extra cost of producing one more unit

marginal revenue

the money made from the sale of each additional unit of output

Total cost

the sum of fixed costs and variable costs

Supply is defined as...

the willingness and ability of producers to offer goods and services for sale

Which of the following is most likely to have elasticity of supply for their product?

wedding-cake baker

Increasing returns

when hiring new workers causes marginal product to grow

The law of supply states that...

when prices go down, quantity supplied goes down; when prices go up, quantity supplied goes up


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