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ECON111 > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

What is accounting profit?

A

Total revenue minus explicit costs

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2
Q

What does L represent in economics?

A

Variable inputs

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3
Q

What is the first step to determine total cost?

A

Identify inputs for output

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4
Q

What is average cost?

A

Total cost / Quantity

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5
Q

How are total costs calculated?

A

Total costs equal fixed costs plus variable costs.

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6
Q

What is Average Total Cost?

A

Total Cost / Quantity

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7
Q

What indicates a firm’s profit margin?

A

Market price vs average cost

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8
Q

What do firms do as labor costs increase?

A

Shift to less expensive inputs

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9
Q

What is constant returns to scale?

A

Average cost does not change

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10
Q

What determines the effectiveness of countries in agglomeration economies?

A

Ability to benefit and minimize diseconomies

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11
Q

What is likely if demand is less than LRAC minimum?

A

Single-producer monopoly

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12
Q

What does production involve?

A

Converting inputs to outputs

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13
Q

What is economic profit?

A

Total revenue minus total cost

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14
Q

What does labor mean in production?

A

Human effort

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15
Q

What does K represent in economics?

A

Fixed inputs

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16
Q

What do factor payments represent from a firm’s perspective?

A

Costs

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17
Q

What does increased specialization lead to?

A

Increasing marginal productivity

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18
Q

What must total revenue exceed for a firm to earn a profit?

A

Total costs

19
Q

What happens if market price is below average cost?

A

Negative profits

20
Q

What type of production technologies do multinational employers use in high-wage economies?

A

More machines, fewer workers

21
Q

What does the long-run average cost curve represent?

A

Least expensive average cost

22
Q

What do economies of scale refer to?

A

Long-run average cost curve.

23
Q

What do cities provide for businesses?

A

Large group of customers

24
Q

What are explicit costs?

A

Out-of-pocket costs

25
Q

What is the Law of Diminishing Marginal Product?

A

Short run production characteristic

26
Q

What do factor payments represent from the owner’s perspective?

A

Income

27
Q

What is the total cost composed of?

A

Fixed costs + Variable costs

28
Q

What units are marginal cost, average cost, and average variable cost measured in?

A

Dollars per unit

29
Q

What type of production technologies do multinational employers use in lower-wage countries?

A

More workers, less machinery

30
Q

Why do overly large factories struggle?

A

High production costs

31
Q

What determines true economic profit?

A

Explicit + implicit costs.

32
Q

What does capital refer to in economics?

A

Physical capital

33
Q

What is treated as a ‘cost’ for entrepreneurs?

A

Profit

34
Q

What are fixed costs?

A

Costs of fixed inputs

35
Q

What is diminishing marginal productivity?

A

Less output from inputs

36
Q

What may happen to a popular website with a large rise in visitors?

A

Overwhelm the website

37
Q

Which stores exemplify economies of scale?

A

Costco, Walmart

38
Q

What is the relationship between short-run average cost (SRAC) curves and long-run average cost (LRAC) curves?

A

LRAC is the lowest cost for each output when fixed costs vary; it’s formed by the bottom edge of the SRAC curves.

39
Q

What do firms do when in the diseconomies region?

A

Shrink operations

40
Q

How might information and communications technology affect market structure?

A

Increase small competitors OR create winner-take-all markets

41
Q

What is a production function?

A

Relationship between inputs and outputs

42
Q

Do fixed costs change with the level of production?

A

No

43
Q

What can firms analyze to understand profit earning?

A

Total costs: fixed and variable

ECON111 (31 decks)

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