1141 Questions & Blanks Flashcards
The four basic factors of production
FOP
capital
labor
management
natural resources
The four basic factors of production must be __________________, are used in conjunction with one another, may be ____________, and must be organized so that maximum _____________________.
purchased at market price
combined in varying proportions
output is obtained at minimum cost
The terms ____________ refer to the degree of flexibility a firm has in changing its level of output
short run and long run
To an economist, capital includes _________________
tools, machines, and buildings
The division of labor is a vital part of the labor factor of production because ______________________
it increases production by allowing workers to specialize in one kind of work
_______ includes the actual running of the firm
Administration
A _________ usually supervises and coordinates managers.
president or CEO
Opportunity costs are also called _________
implicit costs
Accounting costs are also called __________
explicit costs
___________ include the amount the entrepreneur’s labor is worth to his company, the amount he could earn at another company, the amount he could earn by leasing the building and/or land, and the amount he could earn by investing in another industry.
Opportunity costs
____________ include raw materials, fuel, labor, equipment, buildings, and machinery.
Accounting costs
________ include interest, insurance, taxes, rent, and executive salaries.
Fixed costs
________ include labor, raw materials, and utilities
Variable costs
____________ continue to decline as production increases.
Average fixed costs
____________ at first decline as output increases, but at some point they begin to rise
Average variable costs
The _____________________________ states that, as more and more of a variable input is added to an existing fixed input, at some point the additional output obtained from the additional input will decline.
law of diminishing marginal utility
___________ is the additional output produced by each additional worker.
Marginal product
___________ is the amount produced by each worker
average output
Diminishing marginal returns begin where average output begins to ___________
decline
A knowledge of its _________ is helpful to a firm in deciding whether to change output
marginal cost
Average fixed, variable, average total, and marginal costs are considered ____________
short run
_____________ describes the lower production costs incurred by a larger company.
Diseconomies of scale
_____________ are realized by larger firms because of mass production
Decreasing unit costs
At the point at which a firm experiences _____________________, it no longer has the lowest unit production costs, its managers may lose touch with the workers and with various aspects of the operation, and it is too large to operate efficiently.
Diseconomies of scale
In the long run, average costs initially fall because of ____________, remain constant for a time, and then rise because of _____________.
Economies of scale
Diseconomies of scale
___________ would not occur if production relationships were only technical
Diseconomies of scale
When a firm grows too large, ________ may lead to diseconomies of scale
increased monitoring costs
decreased morale
The relationship between long-run and short-run average costs is called the _________________ because of the way it looks on a graph
envelope relationship
If a perfectly competitive market did exist, its characteristics would include
a great many sellers who act independently of each other
no interference with market forces affecting supply, demand, and price
standardized products
freedom of new firms to enter or leave the industry at will
market price unaffected by one firm changing its output
production factors that can be shifted from one firm to another
In the short run, only ______________ may be changed.
variable production costs
A/an _____________ is one in which a single producer affects price by changing output
imperfectly competitive market structure
The three types of imperfectly competitive market structures:
monopoly
oligopoly
monopolistic competition
A monopoly may exist because a _______ may be a legal barrier to entry into a market, ___________ may prevent entry into the market, or a firm may produce a _________ that is a natural barrier into the market.
patent
social or historical constraints
unique product
The industry demand curve, which slopes downward, is the same as the _______________
monopoly demand curve
A monopoly must accept a lower market price if it:
increases its output
____________ determine the point at which a monopoly will make the greatest profit
Marginal revenue and marginal cost
Prices are higher and output is lower for a _____________ than a _________________
monopoly
firm in a competitive market
An oligopoly is more like a ________ and a monopolistic competition is more like a ___________.
monopoly
perfectly competitive market
The fact that an individual firm cannot change its __________ without affecting other firms in the industry is one of the most important characteristics of an oligopoly
price
Because it cannot _______, an individual firm in an oligopoly cannot predict its _____________________
predict what its competitors will do
demand schedule, marginal revenue, and output level at which MR = MC
__________ does not usually exist in an oligopoly because of __________
Price competition
fear of a price war
Collusion between firms in an oligopoly establishes prices that are ______________ and are usually _______________
higher than those in a perfect competition
above the minimum point of the ATC curve
A firm in an oligopoly has a ___________ because of its expectations of the reactions of other firms in the industry.
kinked demand curve
The demand curve for _________ in an oligopoly is more elastic than the demand curve for _____________
a single firm
the entire industry
The elements of competition that exist in an oligopoly include the facts that ____________
new firms may enter the market
all firms may advertise to increase sales
technological advances may increase profits by reducing costs
Characteristics of a monopolistic competition include the facts that products are ___________
differentiated
firms act independently
there are multiple levels of competition
entry of new firms in the long run is easy, so there are no long-run profits
No firm in a monopolistic competition considers ____________ when making a decision
the others’ reactions
A firm in a monopolistic competitive market structure produces at a _________ than one in a _______________
lower point
perfectly competitive market structure
Because firms may not be attempting to ___________ and because the ____________ may not be considered a cost, no economic model can accurately represent “real-world” firms.
maximize profits
decision-maker’s salary
MC = MR = P
except in oligopoly
