Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

(Summer) Economics > T1: costs of production and related concepts > Flashcards

T1: costs of production and related concepts Flashcards

study the first deck (Q1) along with this, it's on the test!

1
Q

(MP) [M Prod] Marginal Product of Labor

A

[new amount] The change in output from hiring one additional unit of labor (worker)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Increasing Marginal Returns

A

A level of production in which the marginal product of labor increases as the number of workers increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Diminishing Marginal Returns

A

A level of production at which the marginal product of labor decreases as the number of workers increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Negative Marginal Returns

A

A level of production at which the marginal product of labor is actually negative and decreases the total amount of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

(MC) Marginal Cost

A

[MFC/M Prod] The additional cost of producing one more unit of a good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

(MR) Marginal Revenue

A

The additional income from selling one more unit of a good (equal to price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

(FC) Fixed Cost

A

[constant] A cost that does not change, no matter how much of a good is produced, including none

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

(VC) Variable Cost

A

[labor cost x # of workers] A cost that changes as the amount of product changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

(TC) Total Cost

A

[FC+VC=TC] The sum of fixed cost plus variable cost (the entire cost of production)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

(AFC) Average Fixed Cost

A

[FC/T Prod] fixed cost divided by number of units of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

(AVC) Average Variable Cost

A

[VC/T Prod] Variable cost divided by number of units of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

(ATC) Average Total Cost

A

[TC/T Prod] Total cost divided by number of units of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

(MRP) Marginal Revenue Product of Labor

A

[M Prod x Price] The additional revenue gained from hiring one additional unit of labor (prices remain constant)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

(MFC) Marginal Factor Cost

A

[labor cost, constant] The additional cost of hiring one additional unit of labor (always the same amount per worker)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

(TR) Total Revenue

A

[T Prod x Price] The total revenue made by however many workers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

[P/W] Worker Profit

A

[MRP - MFC] overall profit for specific worker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

(P) Profit

A

[TR - TC] amount of money gained after costs are deducted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

When to hire workers

A

When Marginal Revenue Product (MRP) is greater than (>) Marginal Factor Cost (MFC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are trade offs?

A

the act of giving up one benefit in order to gain another, greater benefit. Result in opportunity costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are opportunity costs?

A

The second option to the option actually chosen. If you choose to sleep instead of studying, you gain rest but your opportunity cost is getting to study and be prepared for class.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is thinking at the margin?

A

you are thinking at the margin when you decide how much more or less to do

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is cost/benefit analysis?

A

The process of choosing between options and thinking of what you will sacrifice and/or gain from the options.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Marginal Benefits and Costs (decisions)

A

Like actual marginal costs, marginal costs are consequences of decisions and marginal benefits are what’s to gain from a decision.

24
Q

Production Possibilities Curve (PPC)

A

a graph that shows alternative ways to use an economy’s productive resources. The axes show different goods and services or categories of good and services and how much of each can be made.

25
Q

Production Possibilities Frontier

A

The line that shows combinations of producing both goods/services on a PPC, a spot on that line is efficient. Below that line is inefficient. Above that line is unattainable unless there is economic growth.

26
Q

What is efficiency/inefficiency?

A

the use of resources in a way that maximizes output of goods and services. Inefficiency is the opposite.

27
Q

What is the law of increasing costs?

A

as production shifts from making one item to another, more and more resources are necessary to increase production of the second item. Opportunity costs of economics.

28
Q

Pure/Perfect Competition

A

The simplest market structure. A large number of firms all produce essentially the exact same products. The market is in equilibrium and firms can enter and exit the market easily.

29
Q

Commodity

A

A product that is considered the same no matter who produces or sells it.

30
Q

What are barriers to entry?

A

factors that make it difficult for new firms to enter a market

31
Q

What is imperfect competition?

A

Created by barriers to entry, this is a market that is not a pure/perfect competition.

32
Q

What are start up costs?

A

the expenses that a new business must pay before it can begin to produce/sell goods

33
Q

Perfect Competition Graphs

A

Price and Quantity as X and Y.
Market: regular equilibrium graph.
Firm: demand is a straight line, Marginal Cost must be under or on this line to make profit.

34
Q

Purely Competitive Market

A

Prices and production costs are low: prices correctly represent the opportunity costs of each product.

35
Q

Monopoly

A

A single seller controls the entire market. Monopolies control output and charge higher prices. Forms when barriers prevent firms from entering a market that has a single supplier.

36
Q

Economies of Scale

A

characteristics, often start up costs, that cause a producer’s average cost to drop as production rises

37
Q

Natural Monopoly

A

A market that runs most efficiently when one large firm provides all of the output. More than one firm causes the market to not function efficiently and thus it naturally becomes a monopoly.

38
Q

Government Monopoly

A

A monopoly created by the government. This can be done with patents, a franchise, a license, or special industrial organization cases.

39
Q

What is a patent?

A

when you patent and invention you (your company) get exclusive rights to sell your new good or service for a specific amount of time.

40
Q

What is a franchise?

A

a contract issued by local authority that gives a single firm the right to sell its goods within an exclusive market.

41
Q

What is a license?

A

grants firms the right to operate a business, especially where scarce resources are involved.

42
Q

Monopoly Graph

A

Price and Quantity as X and Y. Marginal Revenue line below demand line. Marginal Cost must be below or equal to Marginal Revenue to make profit.

43
Q

Price Discrimination

A

The monopolist company (or company w/ market power) divides consumers into two or more groups and charges a different price to each group. Ex: kids and senior citizens are cheaper than regular adults.

44
Q

What is Market Power?

A

the ability to control prices and total market output. don’t need to be a total monopoly to have market power.

45
Q

Monopolistic Competition

A

many companies competing in an open market to sell products that are similar but not identical. Each firm holds a monopoly over their own particular product.

46
Q

What is Differentiation?

A

It enables a monopolistically competitive seller to profit from the differences between their products and competitor’s products.

47
Q

Non-Price Competiton

A

competition through ways that have lower prices: an alternative way for firms to compete. Can be: physical (changing size/color/etc.), location (where it is sold), service level (good service=high prices), advertising.

48
Q

Prices under Monopolistic Competition

A

higher than they would be in pure competition. not as high as they could be under a pure monopoly though.

49
Q

Output under Monopolistic Competition

A

total output falls somewhere between that of a pure monopoly or pure competition.

50
Q

Profits under Monopolistic Competition

A

earn enough to cover all their costs but not to have extremely large profits

51
Q

Oligopoly

A

a market dominated by a few large profitable firms (like russia). Those firms set prices higher and output lower than a purely competitive market. has barriers to entry.

52
Q

What is a Price War?

A

Occurs when the different monopolies in an oligopoly disagree and is the cutting of prices very low to win business: harmful to producers but good for customers.

53
Q

What is a Collusion?

A

An agreement among members of an oligopoly to illegally set prices and production levels. Results in price fixing.

54
Q

What is Price Fixing?

A

A result of Collusion, this is an agreement among firms to sell at the same or very similar prices.

55
Q

What is a Cartel?

A

an agreement by a formal organization of producers to coordinate prices and production: only works if everyone keeps to the output levels agreed upon.

(Summer) Economics (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions