Chapter 7 Flashcards
What is accounting profit?
Total revenue minus explicit costs
What does L represent in economics?
Variable inputs
What is the first step to determine total cost?
Identify inputs for output
What is average cost?
Total cost / Quantity
How are total costs calculated?
Total costs equal fixed costs plus variable costs.
What is Average Total Cost?
Total Cost / Quantity
What indicates a firm’s profit margin?
Market price vs average cost
What do firms do as labor costs increase?
Shift to less expensive inputs
What is constant returns to scale?
Average cost does not change
What determines the effectiveness of countries in agglomeration economies?
Ability to benefit and minimize diseconomies
What is likely if demand is less than LRAC minimum?
Single-producer monopoly
What does production involve?
Converting inputs to outputs
What is economic profit?
Total revenue minus total cost
What does labor mean in production?
Human effort
What does K represent in economics?
Fixed inputs
What do factor payments represent from a firm’s perspective?
Costs
What does increased specialization lead to?
Increasing marginal productivity
What must total revenue exceed for a firm to earn a profit?
Total costs
What happens if market price is below average cost?
Negative profits
What type of production technologies do multinational employers use in high-wage economies?
More machines, fewer workers
What does the long-run average cost curve represent?
Least expensive average cost
What do economies of scale refer to?
Long-run average cost curve.
What do cities provide for businesses?
Large group of customers
What are explicit costs?
Out-of-pocket costs
