Competitive Markets

Question 0

What are implicit costs

Answer 0

Input costs which don’t require an outlay of money by the firm

Question 1

What are explicit costs

Answer 1

Input costs that require an outlaw of money by the firm

Question 2

What is the short run

Answer 2

Period of time where some f.o.p can’t be changed

Question 3

What is the long run

Answer 3

When all f.o.p are variable

Question 4

What is the production function

Answer 4

The relationship between the quantity of inputs used to make a good and the quantity of output of that good

Question 5

What is the marginal product of any factor input

Answer 5

The increase in output that arises from an additional unit of input
- MPf=

Question 6

What is the marginal product of labour

Answer 6

MPl=

Question 7

What is the diminishing marginal product

Answer 7

The property whereby the marginal product of an input declines as the quantity of the input increases

Question 8

What are fixed costs

Answer 8

Costs that aren’t determined by the quantity of output produced

Question 9

Variable costs

Answer 9

Costs that are dependent on the quantity of output produced

Question 10

What is the average costs

Answer 10

Total cost divided by quantity of output

Question 11

Av. Fixed costs

Av. Variable costs

Answer 11

1) FC/q of output

2) VC/q of output

Question 12

What are marginal costs

Answer 12

Increase in total cost that arises from an extra unit of production

Question 13

Why is there a rising marginal costs curve

Answer 13

Diminishing marginal product

Question 14

Why is there a U-shaped ATC curve

Answer 14

ATC=AFC+AVC
AFC always declines
AVC typically rises- diminishing marginal product
Efficient scale- the Q of output that minimises the ATC

Question 15

What are constant returns to scale

Answer 15

The property whereby LR ATC stays the same so the Q of output changes

Question 16

How do you work out returns to scale

Answer 16

%

Question 17

What are the characteristics of a competitive market

Answer 17

Many buyers and sellers
Homogenous goods
Price takers
No barriers to entry/exit
High level of info avail ale to buyers and sellers

Question 18

What is average revenue

Answer 18

Total revenue / q sold

Question 19

What is marginal revenue

Answer 19

Change in total revenue due to an additional unit sold

Question 20

What is economic profit

Answer 20

TR-TC, including both explicit and implicit costs

Question 21

What is accounting profit

Answer 21

TR- Total explicit costs

Question 22

What is normal profit

Answer 22

Min amount required to keep FOP in their current use

Question 23

What is abnormal profit

Answer 23

Profit above normal profit

Question 24

Short run decision to shut down

Answer 24

If TR< VC/Q

P < AVC

Question 25

What are sunk costs

Answer 25

Irretrievable costs

Question 26

Firms LR decision to enter market

Answer 26

TR/Q (AR) < TC/Q (AC)

P>ATC

Question 27

LR decision to leave market

Answer 27

TR<ATC

Question 28

How do you work out profit

Answer 28

TR-TC
(TR/Q - TC/Q) x Q
(P-ATC) x Q

Question 29

How do you work out profit in the LR

Answer 29

(P-ATC) x Q

Question 30

Why might the LR supply curve slope upwards

Answer 30

Some resources used in production may be available only in limited quantities
Firms may have different costs