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Microeconomics- Ch10
production, costs and market structure
| Question | Answer |
|---|---|
| What is the main goal of a firm? | maximize profit |
| profit= | TR-TC |
| the amount that a firm receives from the sale of goods and services | Total revenue |
| Total revenue= | PxQ |
| the amount that a firm pays for inputs used to produce goods or services | Total cost |
| What are the 3 problems that a firm must solve to achieve profit maximization? | how to make the product, what is the cost of making the product, how much can the seller get for the product in the market |
| period of time when some of the firms inputs cannot be changed | short run |
| period of time when all of the firms inputs can be changed | long run |
| Is this short run or long run: you can buy another oven or build a new kitchen | long run |
| an input that cannot be changed in the short run and that stays the same regardless of how much output is produced | fixed factor of production |
| an input that can be changed in the short run and that changes if the level of output changes | variable factor of production |
| marginal product increases with ____ | the first couple of workers |
| eventually marginal product follows the _____ | law of diminishing returns |
| Can marginal product be negative? | Yes |
| Total Cost= | fixed cost + variable cost |
| Marginal Cost= | change in variable cost/ change in quantity |
| Marginal Revenue= | change in TR/ change in Q= price |
| profit increases as long as ... | MR > MC |
| ATC falls as output increases | economies of scale |
| ATC does not change as output increases | constant returns to scale |
| ATC increases | diseconomies of scale |
| a firms total costs of operation has two components | explicit and implicit costs |
| requires a firm to spend money | explicit costs |
| opportunities that could have generated revenue if the firm had invested its resources in another wat | implicit costs |
| when companies report their profits, they provide ____ | accounting profits |
| Accounting profits= | TR- explicit costs |
| are accounting profits accurate representation of how they business is doing? | no |
| Economic profits= | accounting profit- implicit costs |
| suggests that if all firms have identical cost structures, all firms should earn zero economic profit in the long run | competitive market theory |
| produce if profits are positive, exit is profits are negative | long run |
| produce if profits are positive, produce if losses from producing are smaller than losses from not producing and shut down in vice versa | short run |
| if AVC is less than or equal to P which is less than ATC | exit in the long run |
| if P < AVC | shut down in the short run |
Created by:
lmssorgi
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