Smart Book Chapter 6: Microeconomics

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

a factor of production

The average variable cost is

a firm's variable cost divided by total output

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

a horizontal line at the equilibrium

Long run

a period of time of sufficient length that all the firm's factors of production are variable

Short run

a period of time sufficiently short that at least some of the firm's factors of production are fixed

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

A fixed factor of production is

an input whose quantity cannot be changed in the short run

The law of diminishing returns explains why marginal costs eventually

increase

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

increase production

A firm's profit

is the difference between the total revenue it receives from the sale of its product and all costs it incurs in producing it.

Firms in perfectly competitive markets face demand curves that are

perfectly elastic

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

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

Fixed cost

the sum of all payments made to the firm's fixed factors of production

Firm's variable cost

the sum of all payments made to the firm'svariable factors of production

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

Profit equals

total revenue minus total cost