chapter 7 Flashcards

1
Q

how can firms be organized

A
  • single proprietorship
  • ordinary proprietorship
  • limited partnership
  • corporation
  • state owned enterprise
  • non profit organization
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

profit

A

total revenue - total cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

total revenue

A

amount received from sale of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

total cost

A

market value of inputs firm uses in production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

explicit costs

A
  • input costs that require outlay of money by firm

- ex. flour, labour, rent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

implicit costs

A
  • input costs that dont require outlay of money from firm

- ex. instead of baking cookies, could be a professor (opportunity cost of time(

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

accounting profit

A

total revenue - total explicit costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

economic profit

A

total revenue - (total explicit and implicit costs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

negative profits

A
  • economic losses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

link between production and costs

A
  • link betwen costs when buying inputs and firm s production process
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

production function:

A
  • relationship between quantity of inputs used to produce a good and quantity of good
    Q = f(L,K)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

inputs to production

A
  • factors of production

- land, physical capital, labor, entrepreneurship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

intermediate inputs

A

any inputs used in production process (ex. flour to make bread)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

production function

A

increases at a decreasing rate (flatter)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

total costs function

A

increases at an increasing rate (steeper)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

marginal product of labour

A
  • rational people hire at margin
  • hire an extra worker: cost rise by wage paid to worker and output rise by MP
  • diminishing returns: MP decreases as quantity of input increases
17
Q

why diminishing returns?

A
  • in the short run, some fixed inputs

- as more workers are added, typical worker will be less productive

18
Q

fixed cost

A
  • costs that dont vary with quantity of output produced (per cost unit)
19
Q

variable cost

A
  • costs that vary with quantity of output
20
Q

total cost

A

fixed costs - variable costs

21
Q

marginal cost increases with

A

quantity of output produced

22
Q

average total costs curve is

A
  • u shaped
  • as Q rises, initally falling average fixed costs pulls average total costs down
  • eventually average variable costs pulls average total cost up
23
Q

firm producing an output less than minimum average total cost

A
  • excess capacity
24
Q

why is MC important

A
  • if the cost of additional item is less than revenue that would be received, profits rise if more is produced
25
Q

costs in the short run

A
  • some fixed factors of production (some inputs can be changed)
26
Q

costs in the long run

A
  • all factors of production are variable - no fixed costs
27
Q

very long run

A
  • length of time where all firms factors of production and technology can be varied
28
Q

shift with increase of price of variable factor:

A

shifts ATC and MC up

29
Q

shift with increase in price of fixed factor

A
  • increases total fixed costs but variable costs unchanged

- ATC shifts up but MC doesnt