Econ 201 Flashcards
If a perfectly competitive industry is in long-run equilibrium, the price of the product equals minimum:
average total cost.
If the law of diminishing marginal productivity holds true, eventually both the marginal cost curve and the average cost curve must become:
upward-sloping.
The difference between economic profit and accounting profit is equal to
implicit revenues minus implicit costs
rises when the point of diminishing marginal productivity is reached.
marginal cost curve
Given that there are significant economies of scale involved in making flat screen television sets, the cost of manufacturing a flat screen television set most likely will:
fall as the industry matures.
A firm’s total variable cost increases from $4,000 to $4,020 as the firm increases its output from 400 to 401 units. What is the marginal cost of producing the 401st unit?
$20
Constant returns to scale means that long-run:
ATC does not change as output increases
are positive even when no output is produced.
Total fixed costs
The minimum point of the average total cost curve always occurs at a larger output level than the minimum point of the average variable cost curve because:
average fixed costs are falling
If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:
no incentive to supply the good
short-run decision
typically labor can be changed while other inputs (and the production technique) remain the same. Firms can change all of their inputs in the long run, but in the short run some inputs are fixed.
typically downward-sloping at first but then upward-sloping.
long-run average cost curve
price does more of the adjusting in the short run and quantity does more of the adjusting in the long run.
perfectly competitive market
are opportunity costs that affect economic profits but are difficult to measure
Implicit costs
To maximize profits, a perfectly competitive firm should produce until
marginal cost is equal to price
economic profit
accounts for all costs, including opportunity costs,
accounting profit
accounts only for explicit costs.
At very high levels of output, total cost tends to:
increase at an increasing rate.
Along a straight-line demand curve, elasticity
rises as price rises.
Since capital is relatively scarce in India, the economically efficient method of producing food would probably:
not be capital-intensive.
The law of diminishing marginal productivity implies that the marginal product of a variable input:
eventually declines
are constrained because some inputs are fixed and others are variable.
short run decisions
The upward-sloping portion of the short-run average total cost curve is caused by the presence of….
fixed inputs
Economic efficiency is achieved at a particular output level if:
average total cost is as low as possible
