Final

Question 1

Profits =

Answer 1

Total revenue - total cost

Question 2

Explicit costs

Answer 2

Require an outlay of money
Ex: paying wages to workers

Question 3

Implicit costs

Answer 3

Do not require an outlay of money
Ex: the opportunity cost of something

Question 4

Explicit costs + implicit costs

Answer 4

Total cost=

Question 5

Accounting profit

Answer 5

Total revenue - explicit costs

Question 6

Economic profit

Answer 6

Total revenue - total costs

Question 7

Short run

Answer 7

Some inputs are fixed

Question 8

Long run

Answer 8

All inputs are variable

Question 9

Productive function

Answer 9

Shows the r/ship between quantity of inputs used to produce a good and the quantity of output of that good

Question 10

Marginal product

Answer 10

The change in output as result of one additional unit of input being added to production

Question 11

Marginal product of labor =

Answer 11

Change in Q/ change in L
Q1-q2/ L1-L2

Question 12

Law of diminishing marginal productivity

Answer 12

The marginal product of an input declines as the quantity of the input increases (equal out)

Ex) as the # of workers increases the output per person decreases

As workers produce more units of a good or service, their marginal productivity (the amount of additional output generated by each worker) typically declines

Question 13

Fixed cost

Answer 13

Constant

Question 14

Variable costs change with

Answer 14

Quantity produced

Question 15

FC + VC

Answer 15

= total cost

Question 16

Average fixed cost=

Answer 16

AFC = fc/q

Question 17

Average variable cost

Answer 17

AVC =vc/q

Question 18

Average total cost

Answer 18

ATC = tc/q = AFC + AVC

Question 19

Marginal cost

Answer 19

MC = change in total cost/ change in quantity

Question 20

Economies of sale

Answer 20

Average total costs (ATC) falls as quantity (Q) increases

Question 21

Constant returns to scale

Answer 21

ATC stays the same as Q increases

Question 22

Diseconomies scale

Answer 22

ATC rises as Q increases

Question 23

Least competitive includes

Answer 23

Monopoly
Duopoly
Oligopoly

Question 24

Most competitive

Answer 24

Perfect competition

Monopolistic competition

Question 25

Total revenue =

Answer 25

P x Q

Question 26

Average revenue

Answer 26

Total revenue /q

Question 27

Economic decision rule

Answer 27

If marginal benefit is greater than marginal cost = do it Ik marginal benefit is less than marginal cost = don't do it

Question 28

Profit =

Answer 28

Total rev - total cost

Question 29

Profit maximization rule for firms if MR > MC if MR< MC

Answer 29

Marginal cost = marginal rate (revenue) if MR > MC increase Quantity to raise profit if MR< MC reduce Quantity to raise profit

Question 30

Where is consumer surplus on a graph?

Answer 30

On the top, 1/2 x B x H

Question 31

Where can you find producer surplus on a chart?

Answer 31

Bottom, 1/2 x B x H

Question 32

How do you find total surplus on a graph?

Answer 32

Consumer surplus + producer surplus 1/2 x B x H

Question 33

Technology spillovers is

Answer 33

A good thing

Question 34

Social cost =

Answer 34

Private cost + external cost

Question 35

A company whose supply is elastic gets a tax burden. Should they stop?

Answer 35

No, the elastic supply will keep demand up

Question 36

A Coasion solution

Answer 36

Would be the least costly decision for both parties

Question 37

Price taker vs price maker

Answer 37

Price taker takes the price as given and price maker determines price

Question 38

Marginal revenue

Answer 38

change in Total revenue (TR) / change in quantity (Q)

Question 39

Shut down vs exit and difference

Answer 39

Shut down is a short-run decision not to produce anything because of market conditions if P< AVC Exit if a long-run decision to leave market if P

Question 40

Example of a sunk cost

Answer 40

Fixed cost

Question 41

To find profit on a graph

Answer 41

Find where marginal cost and marginal rate meet, find the matching average total cost point and find area of rectangle if there is no area in between it’s a firm w no losses if ATC is above where MC=MR it’s a firm with losses if MC = MR AND ATC is below it profit

Question 42

Zero-profit equilibrium

Answer 42

Economic profit =0 Accounting profit is positive

Question 43

LRATC

Answer 43

long run average total cost

Question 44

A competitive firm is considered a

Answer 44

price taker

Question 45

Gains from specialization of inputs

Answer 45

The economic benefit that arise when firms/individuals focus on producing a specific good or service have a comparative advantage leading to increased efficiency explains why long run average total cost (LRATC) at first decrease as output increases

Question 46

Opportunity cost

Answer 46

The value of the next best alternative that is given up when a decision is made Ex) when choosing to plant a crop for profit you lose out on not planting potatoes because you're planting Christmas trees

Question 47

marginal cost has a curve on a graph because

Answer 47

AFC pulls it down AVC brings it up

Question 48

Social value on a graph shows

Answer 48

A positive externality

Question 49

Social cost represents a

Answer 49

Negative externality on a graph

Question 50

Social value =

Answer 50

Private value + external benefit

Question 51

When would you choose to trade pollution permits?

Answer 51

If its cheaper to purchase pollution permits then it is to regulate the pollution

Question 52

Cost of reducing emissions =

Answer 52

Reduce one ton ($) x tons they have to reduce

Question 53

What is a transactional cost and examples

Answer 53

costs a company must make Cost of communication legally binding agreements cost delays from bargaining

Question 54

Benefit principle

Answer 54

Pay taxes based on the benefits received from gov services more you use, more u pay gasoline taxes

Question 55

Ability to pay principle and examples

Answer 55

Taxes levied on a personaccording to how well they can pay it Vertical equity