Economics 101: Test 3

47 cards

Flash card set for a college course in economics.


 
  
Created Apr 10, 2012
by
gabbyfreeman

 

 
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1
economic profit
 
total revenue - economic cost
2
economic cost
 
The opportunity cost of the inputs used in the production process; equal to explicit cost plus...
3
explicit cost
 
A monetary payment out of pocket to use resources owned by others.
4
implicit cost
 
An opportunity cost that does not involve a monetary payment
5
accounting cost
 
The explicit costs of production
6
accounting profit
 
total revenue - accounting cost
7
marginal product of labor (MP)
 
THe change in output from one additional unit or labor (worker)
MP = ∆Q / ∆L
8
Law of Diminishing Returns
 
As more variable inputs are added to a fixed input in the short run, beyond some point, marginal...
9
total-product curve
 
A curve showing the relationship between the quantity of labor and the quantity of output produced,...
10
fixed cost (FC)
 
Cost that does not vary with the quantity produced ex: rental of facilities
11
variable cost (VC)
 
Cost that varies with the quantity produced
ex: labor
12
short-run total cost (TC)
 
The total cost of production when at least one input is fixed; equal to FC + VC
13
average fixed cost (AFC)
 
The total fixed cost divided by the quantity produced (output)
AFC = TFC / Q
14
average variable cost (AVC)
 
The total variable cost divided by the quantity produced (output)
AVC = TVC / Q
when...
15
average total cost (ATC)
 
Short-run total cost divided by the quantity produced
ATC = AFC + AVC
16
the ATC curve is initially negatively sloped because...
 
- spreading the fixed cost
- labor specialization
17
short-run marginal cost
 
The change in short-run total cost resulting from a one-unit increase in output (∆TC/ ∆Q)
18
long-run total cost (LTC)
 
The total cost of production when a firm is perfectly flexible in choosing its inputs
19
long-run average cost (LAC)
 
The long-run cost divided by the quantity produced
20
short run
 
Period of time in which the firm has both fixed and variable inputs.  Fixed inputs...
21
long run
 
A period of time in which firms can adjust all inputs (so all inputs are variable)....
22
production technology
 
The means for combining inputs in a certain way in order to produce output.  Production...
23
average product (AP)
 
Average product shoes labor (input) productivity; it is equal to total output (Q) divided by...
24
3 stages of production
 
stage 1) MPL increases- workers become more productive by specializing
stage 2) MPL...
25
total fixed costs (TFC)
 
Costs associated with short run fixed inputs that must be paid even if the amount...
26
total variable costs (TVC)
 
Costs that change with different levels of output, as more variable inputs must be used to...
27
total costs (TC)
 
Total production costs

TC = TFC + TVC
28
marginal cost (MC)
 
Change in cost (increase or decrease) associated with producing one more or less unit of output
MC...
29
changes in variable costs
 
1) changes in input prices2) changes in productivity
30
changes in productivity
 
An increase in productivity means that more output can be produced with the same amount of...
31
perfectly competitive market characteristics
 
1) Many producers and consumers
2) Homogeneous products
3) Producers and...
32
perfect competition
 
In the long run, the competitive market equilibrium will result in economic efficiency,...
33
short run profit-maximizing decision model
 
To determine how much a producer will produce and sell, ask:1) Will a firm produce?2) How much...
34
In a perfectly competitive market, why does marginal benefit equal price?
 
MB (or MR) = ∆TR / ∆Q = ∆(PQ) / ∆Q = P(∆Q) / ∆Q = P; MB = P
35
MB vs. MC
 
Production will continue as long as MB > MC
The profit maximizing quantity is where MB...
36
calculating profit
 
πE = TR - TCorπE = (P - ATC)Q
37
short run profit-maximizing decision modelproduce?
 
If P > min AVC - YES
If P < min AVC - NO
38
short run profit-maximizing decision modelhow much?
 
Choose Q where P = MC
39
short run profit-maximizing decision modelprofit, loss, or break-even?
 
πE = (P - ATC) Q
40
perfectly competitive firm's supply curve
 
The supply curve for a perfectly competitive firm is the portion of the marginal cost curve...
41
long run analysis assumptions
 
1) Firm exit and entry are the only adjustments firms can make in response to market...
42
transition from short run to long run
 
a) Start at breakeven where the market price equals minimum ATCb) Analyze a short run shock...
43
long run market equilibrium/ efficiency condition
 
P = MC = min ATC
44
opportunity cost
 
Opportunity costs are incurred when self-owned, self-employed resources are used in production
45
economic profit (πE)
 
πE = total revenue (TR) - explicit costs - opportunity costs
46
accounting profit (πA)
 
πA = total revenue (TR) - explicit costs
47
monopolies exist because of barriers to entry arising from:
 
1) Government action - patents and copyrights, public franchises2) Control of a key natural...

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