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Microeconomics > MidTerm II > Flashcards

MidTerm II Flashcards

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1
Q

Accounting Cost = ____________________

A

Accounting Cost = Operating Costs

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2
Q

Define of Marginal Utility

A

Tbd

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3
Q

Definition of Law of Diminishing Marginal Utility

A

Tbd

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4
Q

Define “Perfect Competition”

A

In perfect competition firms are “price takers”.

There are many small firms

No firm has enough market power to influence price.

Firms can sell as much of a good as it wants at the market price

Firms are free to enter and leave the market

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5
Q

Define long run time period

A

Time period in which all factors of production (resource) are variable

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6
Q

Define “Short Run” time period

A

Time period in which at least one factor of production is fixed
There is no entry or exit point

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7
Q

Define “Shutdown”

A

Shutdown means that you stop production. During shutdown the business still exists.

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8
Q

Define “investment in capital”

A

Tbd

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9
Q

Define “Shutdown Point”

A

The lowest point on the average variable cost (ATC) curve. When price fall below the minimum point on AVC. Total revenue is insufficient to cover variable costs.

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10
Q

Define “human capital”

A

A form of intangible capital that includes the skills and other knowledge that workers have or acquire through education and training

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11
Q

Define “tangible capital”

A

Material things used as inputs in the production of future goods and services

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12
Q

Define “social capital”

A

Capital that provides services to the public

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13
Q

Define “private capital”

A

Physical or tangible capital owned by private firms

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14
Q

Define “depreciation”

A

The decline in an asset’s value over time

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15
Q

Define “normal return”

A

is a return rate that is just sufficient to keep current investors interested in the industry.

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16
Q

Define “stages of production”

A

Tbd

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17
Q

Define “capital intensive”

A

When the capital cost of production exceed the labor cost of producing the same unit of output

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18
Q

Define “labor intensive”

A

When the labor cost of production exceed the capitol cost of producing the same unit of output

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19
Q

What is the formula for determining;

Total Revenue (TR)

A

TR = P * Q

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20
Q

What is the formula for determining;

Profit (P)

A

Profit = Total Revenue - Total Cost

P = TR - TC

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21
Q

What is the formula for determining;

Marginal Revenue (MR)

A

Marginal Revenue (MR) = ^TR/^Q

^ = delta

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22
Q

What is the formula for determining;

Total Fixed Cost (TFC)

A

TFC = AFC/q

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23
Q

What is the formula for determining;

Average Fixed Cost (AFC)

A

AFC = TFC/q

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24
Q

What is the formula for determining;

Total Variable Costs (TVC)

A

TVC = AVC/q
or
TVC = (K X Pk) + (L X Pl)

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25
What is the formula for determining; Average Variable Cost (AVC)
What is the formula for determining; Average Variable Cost (AVC) = TVC/q
26
What is the formula for determining; Marginal Cost (MC)
What is the formula for determining; Marginal Cost (MC) = ^TC/^Q or ^TVC/^Q
27
What is the formula for determining; Marginal Product (MP) for labor and capitol
What is the formula for determining; Marginal Product (MP) ^TP/^L or ^TP/^K
28
What is the formula for determining; Total Units (TU)
tbd
29
What is the formula for determining; Marginal Units (MU)
tbd
30
What is the formula for determining; Marginal Revenue Product (MRP) for labor
MRPl = MPl X Px
31
What is the formula for determining; Total Profit (TP)
Total Profit - Total Revenue - Total Cost TP = TR - TC
32
What is the formula for determining; Total Revenue (TR)
Total Revenue = P X q
33
Economic Cost =
Economic Cost = Operating Cost + Oppurtunity Cost
34
True of false Account Profit > 0 if economic profit is zero
True Account Profit > even if economic profit is zero
35
Define "Total Fixed Cost" (TFC)
Costs that you have to pay when production is zero (overhead costs)
36
What are "variable resources"
Resources in which the amount a firm demands depends on how much it produces
37
Define "Isocost"
Shows all combinations of Capitol (K) and Labor (L) that can be hired/used to a specific cost
38
Define "Isoquants
Isoquants shows all combinations of all Capitol (K) and Labor (L) that can be used to produce a specific quantity.
39
Firms want to ___________ profit
Firms want to maximize profit
40
Define "Marginal Product (MP)"
Marginal Product is the additional units of output that can be produced if you use one more unit of work.
41
At tangency slopes are __________________
At tangency slopes are "equal"
42
What is the "Production Function"
Table or Graph that shows relationship between # of outputs vs. quantity of inputs used
43
Define "Total Product (TP)"
Total Quantity Produced
44
What is the formula for determining; Total Product (AP)
TP/L or TP/K
45
When Marginal Product (MP) increase when you have ___increasing/decreasing___ labor?
When Marginal Product (MP) increase when you have | "increasing" labor.
46
``` Marginal Product (MP) increases when you have increasing labor this results in having "___increase/diminishing ____" returns? ```
When Marginal Product (MP) increases when you have | increasing labor you have "increase" returns.
47
What is the formula for determining; Total Costs (TC)
Total Fixed Costs (TFC) + Total Variable Costs (TVC) TC = TFC + TVC
48
Average Fixed Cost (AFC) ___falls/rises___ as output rises
Average Fixed Cost "falls" as output rises This is because the same total is being spread over, or divided by, a larger number of units.
49
Definition of "spreading overhead"
The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises
50
Define a "total variable cost curve"
Is a graph that shows the relationship between total variable cost and the level of a firm's output (q)
51
Marginal Cost eventually _rises/falls__ with output
Marginal Cost eventually _"rises"_ with output
52
What is the "law of diminishing returns"
The "law of diminishing returns" defines that each additional unit of output costs more to produce.
53
Total Variable Cost (TVC) _decreases/increases__ with increased output
Total Variable Cost (TVC) "increases" with increased output
54
Total Variable Cost(TVC) curve always has a ______ slope
Total Variable Cost curve always has a "positive" slope
55
When Marginal Cost(MC) is below Average Variable Cost (AVC), average cost is ______ .
When Marginal Cost(MC) is below Average Variable Cost (AVC), average cost is "declining."
56
When Marginal Cost(MC) is above Average Variable Cost (AVC), average cost is ______ .
When Marginal Cost(MC) is above Average Variable Cost (AVC), average cost is "rising" .
57
What is the formula for determining; Average Total Costs (ATC)
ATC = Total cost divided by the number of units of output ATC = TC/q or ATC = AFC + AVC
58
Economic costs = ______________________
Accounting costs + opportunity costs
59
Define "Total Variable Cost" (TVC)
Costs that vary with the level of output
60
Define "Average Fixed Cost" (AFC)
Fixed costs per unit of output
61
Define "Average Variable Cost" (AVC)
Variable costs per unit of output
62
Define "Average total costs" (ATC)
Total costs per unit of output
63
Define "Marginal Cost" (MC)
The increase in total cost that results from producing 1 additional unit of output
64
In perfect competition firms are "price takers", what does that mean.
Any product sold over the market price will not be sold.
65
True of False The demand for the product of a competitive firm is perfectly inelastic
False The demand for the product of a competitive firm is perfectly "elastic"
66
Define "Marginal Revenue" (MR)
The added revenue that a firm takes in when it increases output by 1 additional unit.
67
In a perfect competition firms maximum revenue is determined when ___________
In a perfect competition firms maximum revenue is the point at which P = MC = MR
68
If price is above marginal cost, profits can be increased by raising _________ .
If price is above marginal cost, profits can be increased by raising output.
69
When price is below marginal cost (MC) what will be the effect of increase output
Profits will be reduced.
70
When MR > MC profits go __up/down__ with additional output?
When MR > MC profits go "up" with additional output?
71
True of False Firms can exit an industry in a short run.
False Firms "cannot" exit an industry in a short run.
72
What is the "short run supply curve" of a competitive firm
That portion of the Marginal Cost (MC) that lies above the average variable cost curve. It represents the sum of the individual firm supply curves
73
At the "shutdown point" firms will bear losses equal to ______ .
At the "shutdown point" firms will bear losses equal to the fixed costs.
74
At all prices above the "shutdown point", the marginal cost curve shows __________ level of output.
At all prices above the "shutdown point", the marginal cost curve shows the profit maximizing level of output.
75
What is the label for that part of the marginal cost (MC) curve that is above its average cost curve.
The "short run supply curve" is the label given to that part of the marginal cost (MC) curve that is above its average cost curve.
76
The long-run average cost curve represents what?
The long-run average cost curve shows the different scales at which a firm can choose to operate in the long run.
77
When a firm experiences economies of scale, the LRAC will ______ with output
When a firm experiences economies of scale, the LRAC will "decline" with output
78
Define "minimum efficient scale (MES)
The smallest size at which long-run average cost is at its minimum.
79
In long run competitive equilibrium is achieve when _________.
In long run operations equilibrium is achieve when | P = SRMC = SRAC = LRAC and profits are zero
80
Define "marginal product of labor"
It is the additional output produced if a firm hires 1 additional unit of labor.
81
Define "marginal revenue product" (MRP)
The additional revenue a firm earns by employing 1 additional unit of input. (ceteris paribus)
82
What does the "marginal revenue product curve" represent.
The (MRP) curve shows the dollar value of labor's marginal product
83
In order for firms to maximize profit what must happen
In order for firms to maximize profit, costs must be minimized.
84
The average product (AP) represents what
The average product is the output per worker.
85
When marginal product (MP) decreases you have _____________ returns.
When MP decreases you have "diminishing" returns.
86
When marginal product (MP) decreases but remains positive when you use __less/more___ input
When MP decreases but remains positive when you use __less/more___ input.
87
When marginal product (MP)
When marginal product (MP)
88
When marginal product (MP) stays the same you have _____ returns.
When marginal product (MP) stays the same you have constant returns.
89
Define Marginal Utility
The additional satisfaction gained by the consumption or use of one more unit of a good or service
90
Define Total Utility
Total utility is the total amount of satisfaction obtained from consumption of a good or service.
91
Define the law of diminishing marginal utility
The more of any one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional unit.

Microeconomics (3 decks)

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