Exam 3

Question 0

Free goods

Answer 0

When goods have no prices & markets can’t work properly

Question 1

Examples of Free goods

Answer 1

Parks, air, water, national defense

Question 2

When is a good EXCLUDABLE?

Answer 2

When a person is prevented from using the good because of another person’s use

Question 3

Examples of an EXCLUDABLE good

Answer 3

Fish tacos, wireless Internet

Question 4

When is a good a RIVAL IN CONSUMPTION?

Answer 4

When a person’s use is completely eliminated because of another person’s use

Question 5

Example of rival in consumption

Answer 5

An eaten fish taco

Question 6

Private goods

Answer 6

Excludable AND rival in consumption

Question 7

Public goods

Answer 7

NOT excludable, NOT rival in consumption

Question 8

Common resources

Answer 8

Rival in consumption but NOT excludable

Question 9

Club goods

Answer 9

Excludable but NOT rival

Question 10

Public goods problem

Answer 10

Measuring benefit is difficult

Question 11

Public goods

Answer 11

If benefit is > cost it will be produced

Question 12

Cost-benefit analysis

Answer 12

Study that compares cost & benefit of a public good (imprecise)

Question 13

Examples of public goods

Answer 13

National defense, knowledge created through research , fighting poverty

Question 14

Common resources

Answer 14

Often overused, rival in consumption, nonexcludable

Question 15

Profit formula

Answer 15

TOTAL REVENUE - TOTAL COSTS

$per/unit x units

Question 16

Explicit costs

Answer 16

Require an outlay of money (paying wages to workers) money changes hands

Question 17

Implicit costs

Answer 17

Do not require cash outlay (opportunity cost of owners time to run business)

Question 18

Accounting profit

Answer 18

TOTAL REVENUE - EXPLICIT COSTS

Question 19

Production function

Answer 19

Shows the relationship between a company’s output and input (more output , flatter line)

Question 20

Marginal product

Answer 20

MP of any input is the increase in output arising from additional units of that input , all others constant
1 worker = 1,000 units
2 workers = 1,800 units
MP = 800

Question 21

Marginal product of labor formula

Answer 21

CHANGE IN QUANTITY
______________________

CHANGE IN LABOR

Question 22

Marginal cost formula

Answer 22

CHANGE IN TOTAL COSTS
_________________________

CHANGE IN QUANTITY

Question 23

Economic profit formula

Answer 23

REVENUE - TOTAL (IM+EX) COSTS

Question 24

Efficient scale

Answer 24

Quantity that MINIMIZES average total costs

Question 25

There are no fixed costs in

Answer 25

The long run

Question 26

Economies of scale

Answer 26

Average TC decreases as Q increases

Question 27

Constant returns to scale

Answer 27

ATC constant as Q increases

Question 28

Average TC is always (>/<) average VC

Answer 28

Greater than

Question 29

Price takers take the price as given due to

Answer 29

1. Many buyers and sellers | 2. Goods offered for sale are all the same

Question 30

TOTAL REVENUE

Answer 30

P x Q

Question 31

Marginal revenue = Price only in

Answer 31

Competitive markets

Question 32

If MR > MC , increase/decrease Q to raise profit

Answer 32

Increase

Question 33

If MR < MC , increase/decrease Q to raise profit

Answer 33

Decrease

Question 34

when to shutdown

Answer 34

Short-run decision NOT to produce anything due to market conditions

Question 35

When to exit

Answer 35

Long run decision to leave the market

Question 36

Shutdown in SR. =

Answer 36

Fixed costs still being paid

Question 37

Exit in LR=

Answer 37

No costs

Question 38

Shutdown in SR. LOSS

Answer 38

Revenue loss , total revenue

Question 39

Shutdown in SR BENEFIT

Answer 39

Cost saving (VC) FC still owed. So TR < VC ________ Q Only shutdown if P

Question 40

Sunk costs

Answer 40

Costs already committed and cannot be recovered (irrelevant)

Question 41

Exit in LR LOSS

Answer 41

Total revenue loss

Question 42

Exit in LR BENEFIT

Answer 42

Cost savings TC , | TR

Question 43

ENTER in LR if

Answer 43

P>ATC