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Econ 2106 Extra Credit #2 > 7.3-1; 7.3-2; 7.3-3; 7.3-4; 7.3-5 > Flashcards

7.3-1; 7.3-2; 7.3-3; 7.3-4; 7.3-5 Flashcards

1
Q

Variable Cost

A

Cost of hiring the variable input needed to produce a given amount of output

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2
Q

What two things are needed to find variable cost?

A

The amount of labor needed and how much does the labor cost

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3
Q

Wage

A

Is a payment to an employee for labor services

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4
Q

What are at least 3 types of cost?

A

Variable cost, Fixed cost, Average cost, Marginal cost, Total cost

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5
Q

How is the total amount of money spent on labor for any given output calculated?

A

The total number of workers needed for a given output multiplied by their wage

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6
Q

How can variable cost be graphed?

A

By plotting variable cost and different outputs on a two dimensional graph

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7
Q

Inefficient points

A

Points in which additional workers cause total product to fall

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8
Q

T or F: Inefficient points are included on graphs?

A

False: Inefficient points are excluded from the graph

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9
Q

Variable cost curve

A

The graphed version of variabl cost that shows the cost per amount of output

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10
Q

What is on the axis’s of a variable cost curve?

A

Output is on the horizontal axis and Variable cost is on the vertical axis

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11
Q

What happens when the points begin to go backwards on a VC curve?

A

No more points are graphed because that is the point in which more labor reduces output

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12
Q

T or F: A variable curve graph is a straight line

A

False: A variable curve graph is a curve

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13
Q

When the points on a VC graph begin to go backwards does the output become more or less efficient?

A

The output becomes less efficient because more labor is producing less product

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14
Q

T or F: A VC graph does have a maximum output point

A

True

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15
Q

At the maximum output point on a VC graph it is interpreted that..?

A

Adding more labor will decrease efficiency and output

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16
Q

Marginal cost

A

Amount it costs to produce one additional unit of output

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17
Q

Mathmatical definition of marginal cost

A

Change in variable cost divided by the change in total product

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18
Q

Why does the marginal cost change?

A

Productivity changes

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19
Q

T or F: As productivity increases marginal cost decreases

A

True

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20
Q

When graphing marginal cost what are the axis’s labled?

A

The vertical axis is marginal cost while the horizontal axis is the total product

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21
Q

T or F: Productivity and cost are inversely related

A

True

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22
Q

T or F: Marginal cost and marginal product are directly related

A

False. Marginal cost and marginal product are inversely related

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23
Q

Total product

A

Identifies what outputs are possible for given amounts of input

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24
Q

What does a total product graph look like?

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25
Q

What does a variable cost curve look like?

26
Q

What does a marginal product graph look like?

27
Q

What does the marginal cost graph look like?

28
Q

Point of inflection

A

Point at which the VC curve is flat

29
Q

Variable cost curve

A

Shows how much money must be spent of labor to produce a given level of output

30
Q

Why does marginal cost decrease?

A

Due to specilization and teamwork

31
Q

Why does marginal cost increase?

A

Because of congestion and to many workers in the workplace

32
Q

Fixed input

A

An item required to produce goods and services that does not demonstrate short term variations

33
Q

What is an example of fixed input?

A

An example of fixed input would be a factory. A factory is not affected by short term variations

34
Q

Productivity

A

Is a measure of the efficiency of production. The measure of productivity is defined as a total output per one unit of a total input

35
Q

Changes in MC are always the result of changes in _____?

A

Productivity

36
Q

The marginal cost curve mirrors what?

A

The marginal production curve

37
Q

How do you graph a MC cruve?

A

By plotting the cost associated with various outputs

38
Q

What is a second way to draw the MC curve?

A

find the slope of the variable cost
curve at several points, and plot those points below the variable cost curve.

39
Q

Why are the MC curve and MP curve a mirror to each other?

A

because productivity and costs have a
reciprocal/inverse relationship.

40
Q

Marginal cost is rising when marginal product is doing what?

A

Falling. They are inversly related

41
Q

What is the relationship between marginals and averages?

A

When marginals are higher than averages they pull averages up and when they are lower they pull averages down

42
Q

Marginal cost equals wage dived by what? MC = W/?

A

Marginal product MC = W/MP

43
Q

When marginal product reaches a maximum, marginal cost is at a _______?

A

Minimum. MP and MC are inversely related

44
Q

Why does marginal product fall?

A

Because of congestion

45
Q

Why does marginal product rise?

A

Because of teamwork and specilization

46
Q

What is equal to Wage divided by MP?

A

Marginal cost. MC = W/MP

47
Q

What mirrors a marginal cost curve?

A

Marginal product curve

48
Q

Can a firm have partial workers?

A

Yes they would be considered part time employees

49
Q

T or F: A rational firm will always produce goods at any level. Even if that level is inefficient.

A

False: No rational firm would produce at an inefficient level

50
Q

Average variable cost

A

Is the variable cost per unit of total product

51
Q

How is AVC calculated?

A

divide variable cost at a given total product level by that total product.

52
Q

T or F: If AVC is lower than price then the firm could make a profit

A

True

53
Q

What two cost determine if a firm could make a profit?

A

Variable cost and Fixed cost

54
Q

What does AVC do?

A

AVC tells a firm if it has the potential to make a profit

55
Q

What is another way to derieve the marginal cost curve?

A

Plot it under the variable cost curve

56
Q

Marginal cost is the slope of the?

A

Variable cost curve at any given point

57
Q

What point on the VC curve has the smallest slope?

A

The point of inflection

58
Q

At the inflection point the slope changes from ____ to ____

A

Concave/Convex

59
Q

The inflection point is the lowest point on what curve?

A

The MC curve. The MC is decreasing up to that point and increasing after

60
Q

What does the VC curve show?

A

the increasing variable
costs associated with each output level.

61
Q
A

Econ 2106 Extra Credit #2 (4 decks)

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