Quiz #3 (Chp 11, 13, 14)

Question 1

Profit eq.

Answer 1

P = R - C
π = TR - TC

Question 2

Explicit Cost

Answer 2

Costs that must be paid. Costs that require an outlay of money by the firm.

Question 3

Implicit Cost

Answer 3

Input costs that do not require an outlay of money by the firm.

Question 4

Accounting Profit eq.

Answer 4

TR - TEC (total economic cost)

Question 5

Economic Profit eq.

Answer 5

TR-TC ; including both explicit & implicit costs

Question 6

Fixed Cost

Answer 6

Costs that do not vary w/the quantity of output produced

Question 7

Variable Cost

Answer 7

Costs that vary w/the quantity of output produced

Question 8

Total Cost

Answer 8

Market value of the input a firm uses in production

Question 9

Marginal Cost

Answer 9

The increase in total cost that arises from an extra unit of production

Question 10

Average Fixed Cost

Answer 10

Fixed cost dived by the quantity of output

Question 11

Average Variable Cost

Answer 11

Variable cost divided by the quantity of output

Question 12

Average Total Cost eq.

Answer 12

ATC = TC/q 
ATC= AFC + AVC

Question 13

Economies of Scale

Answer 13

When long-run ATC declines as more products are produced

Question 14

Diseconomies of Scale

Answer 14

When long-run ATC increase as more products are produced

Question 15

Excludable Good

Answer 15

Goods that can be prevented from use

Question 16

Rival in Consumption Good

Answer 16

Use of the good diminishes the ability of another to use the same good

Question 17

Public Good

Answer 17

Neither Excludable nor Rival in Comparison; EX National Defense, Basic Research, Fighting Poverty

Question 18

Free rider

Answer 18

A person who receives the benefit of a good but avoids paying for it.

Question 19

Common Resources

Answer 19

Rival in Comparison but not Excludable; EX Clean Air and Water, Congested Roads, Fish, Whales, other Wildlife

Question 20

Shut down eq.

Answer 20

P < AVC
TR < VC
TR/Q < VC/Q