Ch. 6-Supply & Marginal Cost

Question 0

Competitive Market

Answer 0

A market in which a large number of firms sell very similar or identical products, consumers are well informed about the price that each firm charges for its product, and resources move easily into and out of the market in response to profits and losses

Question 1

Supply

Answer 1

The amount of a product that a firm is willing and able to sell over a certain period of time

Question 2

Price Taker

Answer 2

A firm or individual who has no influence over market price

Question 3

Individual Firm’s Supply Schedule

Answer 3

The quantity that the firm is willing and able to supply at each price, other things equal

Question 4

Individual Firm’s Supply Curve

Answer 4

A graphical representation of the individual firm’s supply schedule, showing the quantity that the firm is willing and able to supply at each price, other things equal

Question 5

Law of Supply

Answer 5

Other things equal, the lower the price of a product, the smaller the quantity supplied; the higher the price of a product, the larger the quantity supplied

Question 6

Marginal Cost

Answer 6

The addition to total cost of producing an additional unit of output; in general, the change in total cost divided by the change in output

Question 7

Marginal Cost Curve

Answer 7

A graphical representation of marginal cost, showing at each output the addition to total cost of producing an additional unit of output

Question 8

Supply Rule for Maximizing Profit

Answer 8

A competitive firm should produce the output at which price (marginal revenue) equals marginal cost

Question 9

Marginal Benefit

Answer 9

The additional benefit, in terms of the objectives, of the next unit of an activity

Question 10

Marginal Revenue

Answer 10

The increase in total revenue from selling one more unit of output; equal to price for a competitive firm

Question 11

Short Run

Answer 11

A period of time short enough that at least one factor of production remains fixed and long enough that at least one factor is variable

Question 12

Long Run

Answer 12

A period of time long enough that the firm is able to vary all factors of production and firms can enter or leave the industry

Question 13

Law of Diminishing Returns

Answer 13

As increasing amounts of a variable factor of production are added to one or more fixed factors of production, the marginal product of the variable factor eventually declines

Question 14

Marginal Product of Labor

Answer 14

The additional output produced by hiring one more unit of labor, holding all other factors of production constant

Question 15

Market Supply Schedule

Answer 15

The total quantity of all the firms in the market are willing and able to supply at each price, other things equal; the sum of the individual firm’s supply schedules

Question 16

Market Supply Curve

Answer 16

A graphical representation of the market supply schedule, showing the total quantity that all firms in the market are willing and able to supply at each price, other things equal; equal to the horizontal summation of the individual firms’ supply curves; also called the industry supply curve

Question 17

Change in Quantity Supplied

Answer 17

A movement along the supply curve as price changes, other things equal

Question 18

Change in Supply

Answer 18

A shift in the entire supply curve

Question 19

(Price) Elasticity of Supply

Answer 19

A measure of the responsiveness of quantity supplied to a change in price along a supply curve; specifically, the percentage change in quantity supplied divided by the percentage change in price

Question 20

Momentary Run

Answer 20

The period of time during which output is set and a supply response is impossible