Q4 Microeconomics Flashcards
(71 cards)
Firms transform inputs into:
outputs
2 types of inputs:
1) Fixed input: cannot be changed in the short run, fixed for a period of time (eg. land)
2) Variable input: can be changed at any time (eg. labor, intermediary good)
Short vs long run inputs
In the long run ALL inputs can be adjusted (no imput is fixed)
Describing production: Economies of Scale
1) Firmos costs priklauso nuo its scale of production ir production technology tipo, kurį ji naudoja.
2) Didelės firmos gali būti labiau profitable nei mažos, nes turi technological ir/arba cost advantages.
We say that production exhibits:
INCREASING RETURNS TO SCALE (inputs increase by a given proportion, and production increases by the same proportion)
CONSTANT TURTUNS TO SCALE (inputs increase by a given proportion, and production increases by the same proportion)
DECREASING RETURNS TO SCALE aka DISECONOMIES OF SCALE (inputs increase by a given proportion, and production increases increases less than proportionaliy
Economies of scale includes:
- Cost advantages - large firms can purchase inputs on more favourable terms, because they have greater bargaining power when negotiating with suppliers.
- Demand advantages - Network effects (value of output rises with number of users eg. software application).
- Large firms can also suffwer from diseconomies of scale, eg. additional layers of bureaucracy due to too many amployees.
Fixed cost (FC) is
Cost of fixed input and does not depend on the quantity of oputput produced int he short run.
Cost function shows and is used for:
How total production costs vary with quantity produced.
To make pricing and production decisions.
Variable cost (VC) increases with the
quantity of output produced: more output means more units of variable input.
Average cost is (and savybės)
average cost per unit of output you produce.
1) If you have a graph calculated as the slope spindulio nuo the origin (0 likely?) to a given point on the cost function (pvz A). Trikampio įžambinė, bet tipo jie tiesiog padalina y axis iš x.
Elastic or inelastic or unit
The absolute value is more than 1. (Ignore the minus, nes absolute value)
=1 -> unit lygtais?
o maziau uz absolute value nu karoc is iraso gaut
What is demand?
How many people are willing to buy a product for a certain price
Reservation price is
the lowest price…. 57:00-58:00
Kazkas apie marginal cost = price
Large firms may be able to produce at lower cost for two reasons:
Economies of scale in production,
Cost advantages: Fixed costs such as advertising, acquiring necessary patents or other intellectual property rights (IPR), and installing infrastructure (such as an electricity grid) have a smaller effect on the cost per unit when output is high. And larger firms may be able to purchase inputs at a lower cost because they have more bargaining power.
diseconomies of scale (decreasing returns)
when output rises by a smaller proportion, and constant returns if it rises in proportion to inputs.
Firms typically organize themselves as hierarchies in which employees are supervised by those at a higher level and, as the firm grows, the organizational costs will grow as a proportion of the firm’s overall costs.
Economies of scale may result from
specialization within the firm, which allows employees to do the task they do best, and reduces training time by limiting the skill set that each worker needs.
for purely engineering reasons: transporting more liquid in a brewery requires a larger pipe, but doubling the material used to construct a pipe more than doubles its capacity.
One response to organizational diseconomies of scale is to
outsource production of components.
network economies of scale
people are more likely to buy a product or service if it already has a lot of users (sc media as example)
Lon-run vs short-run cost function means
The short-run cost function - a period where at least one production factor is fixed, and firms can only adjust variable inputs. Costs include fixed and variable costs.
The long-run cost function - a period where all production factors are variable, allowing firms to adjust all inputs for the most cost-efficient production.
When a firm sells a differentiated product, it faces a…
downward-sloping demand curve.
For any product that consumers might wish to buy, the product demand curve is a relationship that tells you the…
number of items (the quantity) they will buy at each possible price.
Marginal cost
Tai yra papildomi kaštai, kurie atsiranda pagaminus vieną papildomą prekę ar paslaugą. Kitaip tariant, tai kaštai, kuriuos įmonė patiria, norėdama padidinti gamybą vienu vienetu. Ribos kaštai dažnai naudojami sprendimų priėmimui, siekiant nustatyti, ar verta didinti gamybą.
- Calculated as the slope of the cost function at a given point.
WTP
Willingness to pay
Demand curve
shows the quantity that consumers will buy at
each price
Isoprofit curves show…
price-quantity combinations that give
the same profit.
