Chapter 7 - Producers in the short run Flashcards Preview

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Flashcards in Chapter 7 - Producers in the short run Deck (49)
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1

6 types of firms

Single proprietorships, Ordinary partnerships, Limited partnerships, Corporations, State-owned (crown) corporations, Non-profit organizations

2

One other type of firms

transnational corporations (TNCs) or multinational enterprises (MNEs)

3

2 types of (financial) capital firms use

equity and debt

4

what is equity and what happens w/ firm profits

way to acquire funds from the owners. Synonym for stocks or shares. (actions). Profits may be distributed as dividends

5

how firm uses debt for financial capital

give bonds to lenders (of money). they will have to give them their money back with interest

6

who are the firm's creditors

the lenders (not the owners)

7

2 key assumptions of economists about firms

1) Profit-maximizers
2) Assumed to be a single, consistent, decision-making unit

8

What firms must do aside maximizing profits

Become socially responsible

9

How can we respond to socially irresponsible firms (2)

1) Duty of gvt to set rules
2) Expression of consumers' preferences in the market place

10

4 types of inputs firms use for production

1) Intermediate products
2) Inputs provided by nature
3) Inputs provided by people (such as labour services)
4) Inputs provided by services of physical capital (machines)

11

Production function

q = f(L,K) relation between labour/capital and output

12

production flow or stock

flow

13

Profits formula

Total revenue - Total cost

14

Accounting profits formula

Total revenue - Explicit cost

15

Economic profits formula

Total revenue - (Explicit + Implicit costs)

16

Implicit cost what it is

opportunity cost of the owner's TIME and CAPITAL in the firm's cost

17

what a positive economic profit means

Owner's capital is earning more than it could in the next best alternative use

18

what an economic profit of zero means

Owner interested in continuing production

19

what a negative economic profit means

Owner must consider other options (capital not used to its best)

20

Firm's economic profit formula

Pi = TR (total revenue) - TC (total cost)

21

What is TR (how do you find it)

q x p

22

What is TC (how do you find it)

explicit + implicit costs

23

what TR depends on

type of demand the firm faces

24

What TC depends on

Time horizons for decision making (will affect how firm can change capital and labour)

25

Short run def

Length of time over which some of the firm's factors of production are fixed, generally capital is fixed in short run

26

Long run def

Length of time over which all factors of production of firm can vary but technology is fixed

27

Very long run def

Length of time over which all firm's factors of prod. can vary and its technology can vary

28

Production function in the short run

q = f(L,K bar)

29

Total product

Amount of output produced in a certain period

30

Average product

AP = TP / L where L is labour or could also be another unit of the variable factor.