Revenue, Costs And Profits

Question 1

TC = ?

Answer 1

Fixed + variable costs

Question 2

MC = ?

Answer 2

Change in total cost/change in output

Question 3

what is the law of diminishing returns

Answer 3

it’s a phenomenon that occurs in the short run; where employing an additional factor of production causes a relatively smaller increase in output. where MP starts falling.

Question 4

AR = ?

Answer 4

Total Revenue/Quantity

Question 5

MR = ?

Answer 5

Change in Total Revenue/

Change in Quantity

Question 6

Profit

Answer 6

revenue - cost

Question 7

when is it normal profit

Answer 7

AC = AR, The profit that the firm could make by using its resources in their next best use

Question 8

when is it supernormal/abnormal profit

Answer 8

AR > AC

Question 9

What is the shutdown point for a price setter in the short run

Answer 9

AR < AVC

Question 10

What is economic cost

Answer 10

The opportunity cost of an input to the production process.

Question 11

What is fixed cost (indirect/overhead cost)

Answer 11

Costs that do not vary as the level of output increases or decreases.

Question 12

What is imputed cost

Answer 12

an economic cost that a firm does not pay for with money to another firm but it is the opportunity cost of factors of production which the firm itself owns.

Question 13

What is variable cost (direct/prime costs)

Answer 13

costs that vary directly in proportion to the level of output of a firm. Changes with output.

Question 14

What are economies of scale

Answer 14

A fall in the long-run average costs of production as output rises

Question 15

What are diseconomies of scale

Answer 15

A rise in the long-run average costs of production as output rises

Question 16

what is the minimum efficiency of scale (MES)

Answer 16

the lowest level of output at which long-run average cost is minimized

Question 17

What is the optimum level of production

Answer 17

The range of output over which long-run average is lowest

Question 18

What is the long-run shutdown point

Answer 18

where normal profit is not being earned in the long run

Question 19

What is the law of diminishing returns

Answer 19

the law that states that if the input of one factor of production is increasing along with a fixed input, output will eventually decline.

Question 20

What the internal economies of scale

Answer 20

financial economies (big finance pool)
technical economies (increasing returns to scale)
managerial economies (specialization)
marketing economies (low average costs due to advertising)
purchasing economies (buying raw materials in bulk)
Risk bearing economies (diversification)