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Microeconomics > MidTerm II > Flashcards

MidTerm II Flashcards

1
Q

Accounting Cost = ____________________

A

Accounting Cost = Operating Costs

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2
Q

Define of Marginal Utility

A

Tbd

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3
Q

Definition of Law of Diminishing Marginal Utility

A

Tbd

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4
Q

Define “Perfect Competition”

A

In perfect competition firms are “price takers”.

There are many small firms

No firm has enough market power to influence price.

Firms can sell as much of a good as it wants at the market price

Firms are free to enter and leave the market

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5
Q

Define long run time period

A

Time period in which all factors of production (resource) are variable

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6
Q

Define “Short Run” time period

A

Time period in which at least one factor of production is fixed
There is no entry or exit point

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7
Q

Define “Shutdown”

A

Shutdown means that you stop production. During shutdown the business still exists.

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8
Q

Define “investment in capital”

A

Tbd

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9
Q

Define “Shutdown Point”

A

The lowest point on the average variable cost (ATC) curve. When price fall below the minimum point on AVC. Total revenue is insufficient to cover variable costs.

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10
Q

Define “human capital”

A

A form of intangible capital that includes the skills and other knowledge that workers have or acquire through education and training

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11
Q

Define “tangible capital”

A

Material things used as inputs in the production of future goods and services

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12
Q

Define “social capital”

A

Capital that provides services to the public

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13
Q

Define “private capital”

A

Physical or tangible capital owned by private firms

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14
Q

Define “depreciation”

A

The decline in an asset’s value over time

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15
Q

Define “normal return”

A

is a return rate that is just sufficient to keep current investors interested in the industry.

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16
Q

Define “stages of production”

A

Tbd

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17
Q

Define “capital intensive”

A

When the capital cost of production exceed the labor cost of producing the same unit of output

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18
Q

Define “labor intensive”

A

When the labor cost of production exceed the capitol cost of producing the same unit of output

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19
Q

What is the formula for determining;

Total Revenue (TR)

A

TR = P * Q

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20
Q

What is the formula for determining;

Profit (P)

A

Profit = Total Revenue - Total Cost

P = TR - TC

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21
Q

What is the formula for determining;

Marginal Revenue (MR)

A

Marginal Revenue (MR) = ^TR/^Q

^ = delta

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22
Q

What is the formula for determining;

Total Fixed Cost (TFC)

A

TFC = AFC/q

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23
Q

What is the formula for determining;

Average Fixed Cost (AFC)

A

AFC = TFC/q

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24
Q

What is the formula for determining;

Total Variable Costs (TVC)

A

TVC = AVC/q
or
TVC = (K X Pk) + (L X Pl)

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25
Q

What is the formula for determining;

Average Variable Cost (AVC)

A

What is the formula for determining;

Average Variable Cost (AVC) = TVC/q

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26
Q

What is the formula for determining;

Marginal Cost (MC)

A

What is the formula for determining;

Marginal Cost (MC) = ^TC/^Q or ^TVC/^Q

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27
Q

What is the formula for determining;

Marginal Product (MP) for labor and capitol

A

What is the formula for determining;

Marginal Product (MP)

^TP/^L or ^TP/^K

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28
Q

What is the formula for determining;

Total Units (TU)

A

tbd

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29
Q

What is the formula for determining;

Marginal Units (MU)

A

tbd

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30
Q

What is the formula for determining;

Marginal Revenue Product (MRP) for labor

A

MRPl = MPl X Px

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31
Q

What is the formula for determining;

Total Profit (TP)

A

Total Profit - Total Revenue - Total Cost

TP = TR - TC

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32
Q

What is the formula for determining;

Total Revenue (TR)

A

Total Revenue = P X q

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33
Q

Economic Cost =

A

Economic Cost = Operating Cost + Oppurtunity Cost

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34
Q

True of false

Account Profit > 0 if economic profit is zero

A

True

Account Profit > even if economic profit is zero

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35
Q

Define “Total Fixed Cost” (TFC)

A

Costs that you have to pay when production is zero (overhead costs)

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36
Q

What are “variable resources”

A

Resources in which the amount a firm demands depends on how much it produces

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37
Q

Define “Isocost”

A

Shows all combinations of Capitol (K) and Labor (L) that can be hired/used to a specific cost

38
Q

Define “Isoquants

A

Isoquants shows all combinations of all Capitol (K) and Labor (L) that can be used to produce a specific quantity.

39
Q

Firms want to ___________ profit

A

Firms want to maximize profit

40
Q

Define “Marginal Product (MP)”

A

Marginal Product is the additional units of output that can be produced if you use one more unit of work.

41
Q

At tangency slopes are __________________

A

At tangency slopes are “equal”

42
Q

What is the “Production Function”

A

Table or Graph that shows relationship between # of outputs vs. quantity of inputs used

43
Q

Define “Total Product (TP)”

A

Total Quantity Produced

44
Q

What is the formula for determining;

Total Product (AP)

A

TP/L or TP/K

45
Q

When Marginal Product (MP) increase when you have

___increasing/decreasing___ labor?

A

When Marginal Product (MP) increase when you have

“increasing” labor.

46
Q 
Marginal Product (MP) increases when you have 
increasing labor this results in  having "\_\_\_increase/diminishing \_\_\_\_" returns?
A

When Marginal Product (MP) increases when you have

increasing labor you have “increase” returns.

47
Q

What is the formula for determining;

Total Costs (TC)

A

Total Fixed Costs (TFC) + Total Variable Costs (TVC)

TC = TFC + TVC

48
Q

Average Fixed Cost (AFC) ___falls/rises___ as output rises

A

Average Fixed Cost “falls” as output rises

This is because the same total is being spread over, or divided by, a larger number of units.

49
Q

Definition of “spreading overhead”

A

The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises

50
Q

Define a “total variable cost curve”

A

Is a graph that shows the relationship between total variable cost and the level of a firm’s output (q)

51
Q

Marginal Cost eventually _rises/falls__ with output

A

Marginal Cost eventually “rises” with output

52
Q

What is the “law of diminishing returns”

A

The “law of diminishing returns” defines that each additional unit of output costs more to produce.

53
Q

Total Variable Cost (TVC) _decreases/increases__ with increased output

A

Total Variable Cost (TVC) “increases” with increased output

54
Q

Total Variable Cost(TVC) curve always has a ______ slope

A

Total Variable Cost curve always has a “positive” slope

55
Q

When Marginal Cost(MC) is below Average Variable Cost (AVC), average cost is ______ .

A

When Marginal Cost(MC) is below Average Variable Cost (AVC), average cost is “declining.”

56
Q

When Marginal Cost(MC) is above Average Variable Cost (AVC), average cost is ______ .

A

When Marginal Cost(MC) is above Average Variable Cost (AVC), average cost is “rising” .

57
Q

What is the formula for determining;

Average Total Costs (ATC)

A

ATC = Total cost divided by the number of units of output

ATC = TC/q
or
ATC = AFC + AVC

58
Q

Economic costs = ______________________

A

Accounting costs + opportunity costs

59
Q

Define “Total Variable Cost” (TVC)

A

Costs that vary with the level of output

60
Q

Define “Average Fixed Cost” (AFC)

A

Fixed costs per unit of output

61
Q

Define “Average Variable Cost” (AVC)

A

Variable costs per unit of output

62
Q

Define “Average total costs” (ATC)

A

Total costs per unit of output

63
Q

Define “Marginal Cost” (MC)

A

The increase in total cost that results from producing 1 additional unit of output

64
Q

In perfect competition firms are “price takers”, what does that mean.

A

Any product sold over the market price will not be sold.

65
Q

True of False

The demand for the product of a competitive firm is perfectly inelastic

A

False

The demand for the product of a competitive firm is perfectly “elastic”

66
Q

Define “Marginal Revenue” (MR)

A

The added revenue that a firm takes in when it increases output by 1 additional unit.

67
Q

In a perfect competition firms maximum revenue is determined when ___________

A

In a perfect competition firms maximum revenue is the point at which P = MC = MR

68
Q

If price is above marginal cost, profits can be increased by raising _________ .

A

If price is above marginal cost, profits can be increased by raising output.

69
Q

When price is below marginal cost (MC) what will be the effect of increase output

A

Profits will be reduced.

70
Q

When MR > MC profits go __up/down__ with additional output?

A

When MR > MC profits go “up” with additional output?

71
Q

True of False

Firms can exit an industry in a short run.

A

False

Firms “cannot” exit an industry in a short run.

72
Q

What is the “short run supply curve” of a competitive firm

A

That portion of the Marginal Cost (MC) that lies above the average variable cost curve. It represents the sum of the individual firm supply curves

73
Q

At the “shutdown point” firms will bear losses equal to ______ .

A

At the “shutdown point” firms will bear losses equal to the fixed costs.

74
Q

At all prices above the “shutdown point”, the marginal cost curve shows __________ level of output.

A

At all prices above the “shutdown point”, the marginal cost curve shows the profit maximizing level of output.

75
Q

What is the label for that part of the marginal cost (MC) curve that is above its average cost curve.

A

The “short run supply curve” is the label given to that part of the marginal cost (MC) curve that is above its average cost curve.

76
Q

The long-run average cost curve represents what?

A

The long-run average cost curve shows the different scales at which a firm can choose to operate in the long run.

77
Q

When a firm experiences economies of scale, the LRAC will ______ with output

A

When a firm experiences economies of scale, the LRAC will “decline” with output

78
Q

Define “minimum efficient scale (MES)

A

The smallest size at which long-run average cost is at its minimum.

79
Q

In long run competitive equilibrium is achieve when _________.

A

In long run operations equilibrium is achieve when

P = SRMC = SRAC = LRAC and profits are zero

80
Q

Define “marginal product of labor”

A

It is the additional output produced if a firm hires 1 additional unit of labor.

81
Q

Define “marginal revenue product” (MRP)

A

The additional revenue a firm earns by employing 1 additional unit of input. (ceteris paribus)

82
Q

What does the “marginal revenue product curve” represent.

A

The (MRP) curve shows the dollar value of labor’s marginal product

83
Q

In order for firms to maximize profit what must happen

A

In order for firms to maximize profit, costs must be minimized.

84
Q

The average product (AP) represents what

A

The average product is the output per worker.

85
Q

When marginal product (MP) decreases you have _____________ returns.

A

When MP decreases you have “diminishing” returns.

86
Q

When marginal product (MP) decreases but remains positive when you use __less/more___ input

A

When MP decreases but remains positive when you use __less/more___ input.

87
Q

When marginal product (MP)

A

When marginal product (MP)

88
Q

When marginal product (MP) stays the same you have _____ returns.

A

When marginal product (MP) stays the same you have constant returns.

89
Q

Define Marginal Utility

A

The additional satisfaction gained by the consumption or use of one more unit of a good or service

90
Q

Define Total Utility

A

Total utility is the total amount of satisfaction obtained from consumption of a good or service.

91
Q

Define the law of diminishing marginal utility

A

The more of any one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional unit.

Microeconomics (3 decks)

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