7.4-1, 8.2-1, 8.1-1, 8.3-2, 8.3-3 Flashcards
What are the fixed costs in the long run?
Their are no fixed costs or inputs in the long run. All inputs are variables
Labor-Intensive Technology
when a firm uses more labor (Workers) relative to capital (tools)
Capital-Intensive Technology
uses more capital (tools) relative to labor (workers)
Scale or Size of operation is a choice during the long or short run
Long Run. You cannot change the size of the operation during the short run, only add workers
Is the firm able to downsize in the long run?
Yes, the firm can downsize or grow in the long run. All inputs are variables
Long Run
A period of time in which there are no fixed inputs and no fixed costs. all inputs can be varied
A firm can choose either a capital-intensive technology or a labor-intensive technology in the _____ _____.
Long Run
In ____ _____, a firm can only add or eliminate labor
Short Run
Choice of Scale
a firm can choose to build new factories, open new offices, or close existing operations during the long run
Cost minimizing technique
the combination of labor and capital to produce output at the lowest cost
T/F: A wheat farm that uses migrant workers to plant and harvest the crops is capital-intensive?
False. This farm is labor-intensive
change in quantity demanded
a change in a good’s own price leads to a change in quantity demanded, a move along a given demand curve
competitive market
a market where the many buyers and sellers have little market power- each buyer’s or seller’s effect on market price is negligible
market
the process of buyers and sellers exchanging goods and services
market demand curve
the horizontal summation of individual demand curves
market supply curve
a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices
individual demand curve
a graphical representation that shows the inverse relationship between price and quantity demanded
individual demand schedule
a schedule that shows the relationship between price and quantity demanded
Total Revenue
the price it charges for its product multiplied by the quantity of its products it sells ina given period.
Market Power
the ability to influence the price of your product
A firm has market power if it can…
raise the price of its product without losing all of its customers to a competitor. or can lower its product without attracting the entire market
Perfectly competitive
an industry is perfectly competitive if it’s made up of a large number of small firms each selling an identical product
in a perfect competitive market a firm is going to have to price its product _________ the competition
Price their product right with the competition
No barriers to entry
the firm can enter and exit whenever it likes
P*
The market price or going equilibrium price
In a perfect competition market a firm’s demand curve will be ___________ at the market equilibrium price
horizontal. The firm could make and sell all of the product they wanted at the market equilibrium price
Any firms profit is:
the difference between total revenue and total cost
T/F: Firms that can set the product prices alone are called “price takers”
False - Firms with market power, such as monopolies, can set the price of a product are referred to as “price setters”
The competitive firm will not sell at a price lower than the market price because…
They can sell all they want at the market price
A competitive firm cannot sell at a price _______ the market price because _____ will sell it at the market price and the original firm will not sell any of its product
at a price above market price because competition will sell it at market price.
Price takers
a firm that have no market power and have to accept their product’s price as set by the market
price setter
a firm with market power that can raise the price without losing all customers and lower price without attracting the entire market
all firms sell identical products and customers do not distinguish between products in ___________ __________
perfect competition
A firm that has ____ ____ is usually large relative to the size of the market
market power
Competitive firm’s demand curve is a _______ ____ at the equilibrium price
horizontal line
Profit is :
TR-TC and (PRICE x Q) - TC
A firm is in a competitive market when:
it is both unable to influence the price of its product and the firm takes as given the price of its products set by supply and demand in the market
Capital intensive
production that uses a large amount of capital
labor intensive
production that uses a large amount of labor
A profitable, competitive firm divides its total revenue (TR) between its:
variable cost (VC), it fixed costs (FC), and its profit
marginal costs
cost of labor per output unit
equilibrium quantity
the quantity at the intersection of the market supply and demand curves; at the equilibrium quantity, the quantity demanded equals the quantity supplied
equilibrium price
the price at the intersection of the market supply and demand curves, at this price, the quantity demanded equals the quantity supplied
shortage
a situation where quantity demanded exceeds quantity supplied
surplus
a situation where quantity supplied exceeds the quantity demanded
Total Revenue (TR)
TR= p *y or price and quantity sold
to determine profitability, a competitive firm must compare its average total cost (ATC) to the product price (T/F)
True
Total profit for a firm is:
total revenue minus total cost (pq - TC)
a firm in a competitive market will try to produce the output level for which:
marginal cost equals marginal revenue
a firm that produces output at the level where marginal cost (MC) equals price and MC is increasing will be profitable (T/F)
true
in 2001, producing widgets cost the firm $100,000. THe firm sold the weidgets for $125,000. What was the firm’s profit or loss?
$25,000 profit
rule for maximizing profit for a competitive firm
is the firm produces up to the point at which marginal cost equals price
total revenue on a graph is representited as the:
area of the rectangle
