Chapter 4
The price of labor per unit times the amount of labor used is called
Labor cost
The total cost of production is determined by adding which of the following costs?
Labor, capital and land, intermediate inputs, and accumulating business know how
If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal cost, which the following could be the total cost of producing hundred muffins?
$80
One strategy for long-term profit maximization is
Innovation
Any simple grass mowing business, the lawn mower and labor would be
Inputs
What word describes the goods and services that are used to produce output for a business?
Inputs
The goods or services purchased by business for immediate use in the production process or known as
Intermediate inputs
Theodore can make six pizzas in one hour. If Theodore's labor has 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
Inputs used by business in the production process include
Labor
The hours of work supplied by various types of workers are referred to by economists as
Labor
If June can earn $1500 in revenue from painting two houses, how much can she earn in revenue from painting three houses?
Less than $2250
Fixed costs are 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
_Is the added cost to produce one more unit of output
Marginal cost
The additional money a business gets from producing and selling one more unit of output is
Marginal revenue
The extra amount of output business can generate by adding one more hour of labor is called
Marginal revenue
_Is the added revenue from producing and selling one more unit of output
Marginal revenue
A profit maximizing business will increase production as long as
Marginal revenue exceeds marginal cost
As the market price of a good rises, businesses will respond by producing more of that good because
Marginal revenue exceeds marginal cost after price increases
Economists generally assume that the main goal of most businesses in the economy is to
Maximize profits
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 lawnmowing business where you have a push mower and labor as input, by adding an additional inputs in the form of a gas self-propelled mower, what would be the impact on output?
Output would increase
Average product is not as reliable indicator of how a business is doing as it used to be because of
Outsourcing labor
What is the economic process of turning inputs into outputs that a business will sell to consumers?
Production
Economists think of a business as a machine where you put in inputs in one end and get outputs from the other end. This metaphor is called the
Production function
The_summarizes the output of the business, given the level of inputs
Production function
What is the difference between revenue and cost?
Profit
The main objective of a business in a market economy is
Profit maximization
What word describes the money that consumers 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 increases sales, what generally happens to revenue?
Revenue rises because the business is selling more output
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 every day decision making
In the process of long-term profit maximization, the business makes decisions under the assumption that it can
Vary all inputs
What word describes the money that a business pays for its inputs?
Cost
The short term cost function assumes that
All variable costs are equal
Which of the following is an example of a profit maximizing business?
An accountant who makes a living preparing tax returns for other people
Inputs to production do not include
Average product
Output divided by the number of hours worked or by the number of workers is called
Avery's product
The technology or knowledge necessary for the production process is called
Business know how
The Difference between long-term and short-term profit maximization is that in the short term,
Businesses focus on achieving as much profit as they can, given that fixed cost 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
If you add too many inputs, your business may experience
Diminishing marginal product
Many times technology is _ in the equipment a company buys
Embodied
And example of variable costs is
Hourly labor
_Shows the potential cost for each level of output
The cost function