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Microeconomics > Chapter 7 - Producers in the Short Run > Flashcards

Chapter 7 - Producers in the Short Run Flashcards

1
Q

What are the 4 types of inputs for production?

A

Outputs from another firm - intermediate products (ex. electricity)
Provided directly by nature (ex. land)
Services of labour
Services of physical capital (ex. machines and facilities)

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2
Q

What is the production function?

A

Shows the max output that can be produced by combining inputs

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3
Q

How do you calculate profits?

A

Total revenue-total costs

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4
Q

How do you calculate accounting profits?

A

Total revenue-explicit costs

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5
Q

How do you calculate economic profits?

A

Total revenue-(explicit+implicit costs)

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6
Q

Economic profits is (greater/less) than accounting profits

A

Less than

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7
Q

What are explicit costs?

A

Labour, rentals, interest payments on debt, purchases

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8
Q

What are implicit costs?

A

Opportunity cost of time and capital

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9
Q

When talking about a firm’s profit we always mean _ profit

A

Economic

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10
Q

How do you calculate a firm’s economic profit?

A

TR(total revenue)-TC(total cost)

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11
Q

What is the short run?

A

Time period where fixed factors can’t be changed

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12
Q

What is a fixed factor?

A

Element of capital, land, management services, supply of skilled labour

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13
Q

What are variable factors?

A

Inputs that aren’t fixed and can be varied in the short run

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14
Q

What is the long run?

A

Time period where all firm’s factors of production can be varied, but its technology is fixed

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15
Q

What is the very long run?

A

Time period where all firm’s factors of production and its technology can be varied

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16
Q

What is total product (TP)?

A

Total produced in a given time

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17
Q

What is average product (AP)?

A

Total product/# of units of labour

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18
Q

What is the equation for AP?

A

AP=TP/L

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19
Q

What is marginal product (MP)?

A

Change in total output that results from using one more unit of a variable factor

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20
Q

What is the equation for MP?

A

change in TP/change in L

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21
Q

As more workers are added, each can specialize in one task, and the workers’ MP _

A

Rises

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22
Q

If there is a fixed amount of physical capital, eventually the MP is likely to _

A

Fall

23
Q

When AP is _, AP=MP

A

Maximum

24
Q

When AP is _, MP>AP

A

Increasing

25
Q

When AP is _, MP

A

Decreasing

26
Q

What does the law of diminishing return state?

A

If increasing amounts of a variable factor are applied to a given quantity of a fixed factor, the MP of the variable factor declines

27
Q

How do you increase output in the short run?

A

Combine a variable factor with a given amount of the fixed factor

28
Q

If MP>AP, new AP will be (higher/lower)

A

Higher

29
Q

What is the equation for total cost (TC)?

A

Total fixed cost+total variable cost

TC=TFC+TVC

30
Q

What is the equation for average total cost (ATC)?

A

Avg fixed cost+avg variable cost

ATC=AFC+AVC

31
Q

What is total fixed cost (TFC)?

A

Costs of the fixed factor, doesn’t vary with level of output

32
Q

Give an example of a TFC

A

Annual cost for renting a factory

33
Q

What is the equation for AFC?

A

AFC=TFC/Q

34
Q

What is total variable costs (TVC)?

A

Costs of the variable factors, varies with level of output

35
Q

Give an example of TVC

A

Labour costs, material costs

36
Q

What is the equation for AVC?

A

AVC=TVC/Q

37
Q

What is total costs (TC)?

A

Sum of fixed costs and variable costs

38
Q

What is the equation for ATC?

A

ATC=TC/Q

ATC=AVC+AFC

39
Q

What is marginal cost (MC)?

A

Cost of producing each additional unit of output

40
Q

What is the equation for MC?

A

MC=
change in TC/change in Q=
change in TVC/change in Q

41
Q

TFC (does/doesn’t) change with output

A

Doesn’t

42
Q

AFC declines steadily as output (rises/falls)

A

Rises

43
Q

What is the shape of ATC? (3)

A

ATC curve declines
Reaches a min
Then rises

44
Q

The _ curve is U shaped

A

ATC

45
Q

MC curve intersects the _ and _ curves at their minimums

A

ATC, AVC

46
Q

As AP rises, AVC (falls/rises)

A

Falls

47
Q

As AP falls, AVC (falls/rises)

A

Rises

48
Q

Each additional worker adds the (same/different) amount to total cost but (same/different) amount to total output

A

Same, different

49
Q

AVC is at its min when AP reaches its _

A

Max

50
Q

MC reaches its min when MP reaches its _

A

Max

51
Q

What is the capacity of the firm?

A

Level of output at the minimum short-run average total cost (SRATC)

52
Q

Capacity is the largest output that can be produced without encountering (falling/rising) average costs per unit

A

Rising

53
Q

What is excess capacity?

A

Firm that produces an output less than the point of minimum average total cost (ATC)

54
Q

In the short run, if the AP curve is rising, the MP curve lies (above/below) the average product curve above this range

A

Above

Microeconomics (12 decks)

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