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ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE > WEEK 5 > Flashcards

WEEK 5 Flashcards

1
Q

What is the goal of production

A

Profit maxing
Cost minimization

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2
Q

What is the profit formula

A

Profit = total revenue - total cost

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3
Q

Assume what in producer theory

A

Firm makes one good
Firm picked that good
more inputs,more outputs

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4
Q

In the short run

A

Labour is variable
Capital is fixed

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5
Q

In the long run

A

All inputs are variable

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6
Q

What is marginal product of labour

A

Additional output a frim produces by using another unit of labour

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7
Q

How to find MPL

A

differentiating the production function

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8
Q

What is the product function

A

an equation with Y as Q and X as L and K

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9
Q

As a firm gets more labour what happens

A

MPL drops

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10
Q

What is an isoquant

A

A graph which shows what combinations of inputs can make different outputs

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11
Q

What are isoquant key features

A

Downwards sloping
convex curves
Cannot intersect

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12
Q

Output rises where in isoquants

A

Further away from the origin

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13
Q

What is q in the production function

A

Output

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14
Q

What is K in the production function

A

Capital

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15
Q

What is L in the production function

A

Labour

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16
Q

How to solve cobb-douglas functions

A

Sub the powers in then the K and L in to find q

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17
Q

What is the marginal rate of technical substitution

A

The rate at which the frim can trade labour for capital, holding the output constant

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18
Q

What is the equation for MRTS

A

Marginal production of labour / Marginal production of capital

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19
Q

When does a production function have constant returns to scale

A

if changing capital and labour by a multiple changes output by a multiple

20
Q

When does a production function have increasing returns to scale

A

If changing capital and labour by a multiple and changes output by a higher multiple

21
Q

When does a production function have decreasing returns to scale

A

If changing capital and labour by a multiple changes output by a lower amount

22
Q

How do we find total costs

A

Fixed cost + variable cost

23
Q

What comes into fixed costs

A

Capital - rental rate (r)

24
Q

What comes into variable costs

A

Labour - wage rate (w)

25
Q

how to find marginal costs

A

TC differentiated

26
Q

How to find average costs

A

TC / q

27
Q

What is AVC

A

Average variable costs

28
Q

How to find AVC

A

Variable costs / q

29
Q

The smaller elasticity means

A

more sensitive to price changes

30
Q

the larger the elasticity means

A

Less sensitive to price changes

31
Q

In the long run firms choose

A

K and L to maximize production efficiency

32
Q

What is cost minimization

A

Economically efficient input combination for a given q

33
Q

What is an isocost line

A

An isocost line shows what combinations of the two inputs can be employed for a given cost

34
Q

An increase in the cost of labour does what

A

Pivots the isocost line and makes it steeper

35
Q

What happens if an increase in labour happens on the graph

A

Shifts left

36
Q

An increase in the cost of capital does what

A

makes the slope flatter - shifts the line down

37
Q

What is the Y and X in isoquant and isocost lines

A

Y = capital
X = labour

38
Q

What does isoquant mean to isocost lines

A

The isocost is the budget line for costs

39
Q

Where is the best combination of inputs found

A

Where the tangent is between a given isoquant and lowest attainable isocost line

40
Q

When are costs minimized

A

MRTS = w/r

41
Q

in the long run firms can do what

A

shift onto different short run cost curves

42
Q

What does the long run average cost curve look like

A

An envelope around short run average cost curves

43
Q

When does a firm have economies of scale

A

If doubling output causes cost to less than double

44
Q

When does a firm have diseconomies of scale

A

if doubling output causes cost to more than double

45
Q

When does a firm have constant economies of scale

A

If doubling output causes cost to double

46
Q
A

ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE (9 decks)

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