Micro Econ Ch 6

Which of the following capture the conditions under which firms will shutdown?

- If the firm's revenue is less than the firm's variable cost at all levels of output. - If price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost.

A fixed factor of production is ______.

An input whose quantity cannot be changed in the short run

ATC

Average total cost

AVC

Average variable cost

Variable cost divided by total output is called ______.

Average variable cost

Marginal cost

Extra cost of producing one additional unit of production.

Suppose an artist has a year-long lease on the studio where she works. When deciding how many paintings to make in a given month, the rent the artist pays for her studio is considered a _____.

Fixed cost

The law of diminishing returns explains why marginal costs eventually _____.

Increase

If the marginal cost of producing an additional unit of a good is less than price of that good, then the firm should

Increase production

The period of time of sufficient length that all of the firm's factors of production are variable is known as the _____.

Long run

At each point along a market supply curve, price measures each seller's _____.

Marginal cost of production

If the marginal cost of producing the 500th unit of a good is greater than price of that good, then the firm should

Not produce the 500th unit

If output can be varied continuously, then firms in a perfectly competitive market maximize their profits by choosing the level of output such that _____.

P=MC

A price-taking, profit-maximizing firm will always produce a level of output where ______.

Price = MC

The difference between the total revenue of a firm and all costs (explicit and implicit) incurred by the firm is called _____.

Profit

The sum of all the payments made to the firm's fixed and variable factors of production is the firm's _______

Total cost

A _____ factor of production is an input whose quantity can be altered in the short run.

Variable

Variable cost

a cost that rises or falls depending on how much is produced

An input used in the production of a good or service is called ______.

a factor of production

An input whose quantity cannot be altered in the short run is ______.

a fixed factor of production

The demand curve facing a firm in a perfectly competitive market is

a horizontal line at the equilibrium price.

A factor of production is ______.

an input used in the production of a good or service

A variable factor of production is

an input whose quantity can be changed in the short run.

fixed factor of production

an input whose quantity cannot be altered in the short run

Law of Diminishing Marginal Returns

as more of a variable resource is added to a given amount of other resources, marginal product eventually declines and could become negative

Marginal cost eventually increases because of _____.

diminishing returns

One implication of the shape of the demand curve facing a perfectly competitive firm is that

if the firm increases its price above the market price, it will earn zero revenue.

If a firm's total revenue is greater than its total cost, then the firm _____.

is profitable

profit maximizing level of output

p=mc

At each point along a market supply curve, _____ measures each seller's marginal cost of production.

price

The period of time sufficiently short that at least some of the firm's factors of production are fixed is known as the _____.

short run

Producer surplus

the amount by which price exceeds the seller's reservation price

In the short run, a profit-maximizing firm will not produce anything if _____

the firm's revenue is less than its variable cost at all levels of production.

Sellers resevation price

the minimum price that you would accept for the product or service you're selling.

A firm's fixed cost is the sum of all payments made ______

to the firm's fixed factors of production.

A firm is profitable if its total revenue exceeds its _____.

total cost

Fixed cost + variable cost =

total cost

The sum of all payments made to the firm's fixed factors of production is the firm's _____.

Fixed cost

Suppose the owners of a local brewery can easily change the number of workers they hire each day to help brew beer. In deciding how much beer to produce each day, the daily cost of hiring their workers is a _____.

Variable cost

Firms in perfectly competitive markets face demand curves that are _____.

Perfectly Elastic

Suppose the owners of a local brewery carry property insurance that is paid for on an annual basis. In deciding how much beer to produce on any given day, the annual cost of the property insurance is considered a ____.

Fixed cost

If a firm in a perfectly competitive market chooses the level of output such that price equals marginal cost, then the firm is ______.

Maximising its profits

A firm's variable ________ is the sum of all payments the firm makes to inputs whose quantities can be altered in the short run.

Variable cost

Suppose an artist can easily change the number of hours she spends working each month. In deciding how many paintings to paint each month, the opportunity cost of the artist's time is considered a _____.

Variable cost