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ECON111 > Module 5 Productions and Costs > Flashcards

Module 5 Productions and Costs Flashcards

1
Q

What is a firm?

A

An organization producing outputs

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2
Q

What do private firms aim to maximize?

A

Profits

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3
Q

What are the factors of production?

A

Capital, Labor, Natural Resources, Materials

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4
Q

What does Q(K,L) represent?

A

Output as function of capital and labour

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5
Q

What does APL stand for?

A

Average Product of Labour

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6
Q

What is Increasing Returns To Scale (IRS)?

A

Output increases more than inputs.

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7
Q

What does ATC stand for?

A

Average Total Cost

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8
Q

What is the shape of the Average Total Cost (AC) curve?

A

Typically U-shaped

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9
Q

When are profits positive?

A

Price > Average cost

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10
Q

What are economies of scale?

A

Cost per unit decreases with output

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11
Q

What does the LRAC curve indicate for firms?

A

Lowest unit costs at R

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12
Q

What is the difference between a large and small grocery store?

A

Variety of products

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13
Q

What is production?

A

Combining inputs to produce outputs

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14
Q

What does economic profit include?

A

Explicit and implicit costs

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15
Q

What is the Law of Diminishing Marginal Productivity?

A

Additional output declines with more labour

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16
Q

What is the production function in the long run?

A

Q = f [L, K]

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17
Q

What is Constant Returns To Scale (CRS)?

A

Output increases exactly as inputs.

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18
Q

What is the formula for total cost?

A

COST = FIXED COSTS + VARIABLE COSTS

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19
Q

What does AVC stand for?

A

Average Variable Cost

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20
Q

How is Marginal Cost (MC) generally characterized?

A

Upward-sloping

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21
Q

What is the formula for profit?

A

Profit = Revenue - Costs

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22
Q

How can farm households diversify income?

A

Off-farm income

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23
Q

What is a consequence of farmland consolidation?

A

Rural depopulation

24
Q

What affects production function?

A

Capital (K) and Labour (L)

25
Q

How does technology affect the production function?

A

Raises output for same inputs

26
Q

What does AFC stand for?

A

Average Fixed Cost

27
Q

What happens when Price equals average cost?

A

Profits are zero

28
Q

What happens to unit costs as production increases under Diseconomies of Scale?

A

Unit costs rise

29
Q

Which types of businesses have a lot of size variation?

A

Grocery stores, retail stores, farms

30
Q

What does MC stand for?

A

Marginal Cost

31
Q

What does AC equal?

A

AFC + AVC

32
Q

What is the formula for Total Revenue?

A

Total Revenue = P q

33
Q

What are fixed inputs?

A

Inputs not easily changed

34
Q

What is Marginal Product (MP)?

A

Additional output from one more unit of labour

35
Q

How is APL measured?

A

Q/L

36
Q

What does it mean if MPL is above APL?

A

APL rises

37
Q

What happens to APL if MPL is below it?

A

APL falls

38
Q

What are variable costs?

A

Costs of variable inputs

39
Q

What do fixed costs comprise?

A

Costs of fixed inputs

40
Q

Where does the Average Variable Cost (AVC) lie relative to AC?

A

Below AC curve

41
Q

What is the typical shape of the Average Variable Cost (AVC) curve?

A

U-shaped or upward-sloping

42
Q

What does the LRAC curve show?

A

Lowest possible average cost

43
Q

What are the types of firms?

A

For-profit, not-for-profit, government

44
Q

What are variable inputs?

A

Inputs easily changed

45
Q

As L rises, what happens to Q and ?Q?

A

Q rises, ?Q falls

46
Q

What are fixed costs?

A

Costs that do not vary

47
Q

How is Average Total Cost calculated?

A

Total cost / quantity

48
Q

What is the effect of doubling all inputs under IRS?

A

More than double outputs

49
Q

What is Diseconomies of Scale?

A

Rising costs with increased output

50
Q

What happens when a firm produces at a different quantity from the LRAC curve’s minimum?

A

Higher unit costs

51
Q

Why would market structure change over time?

A

Changes in technology, crop varieties, transportation infrastructure, etc.

52
Q

Why would firm size change?

A

Efficient scale changes due to technology and other factors

53
Q

What is ‘Social License’ in farming?

A

Perception of family farms

54
Q

How is Average Variable Cost calculated?

A

Variable cost / quantity

55
Q

What does short-run average cost (SRAC) indicate?

A

Total of average fixed and variable costs

56
Q

What results from a change in technology?

A

Change in production function

57
Q

How is Average Fixed Cost calculated?

A

Fixed cost / quantity

ECON111 (34 decks)

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