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Econ Chp 8,9
| Question | Answer |
|---|---|
| The value or worth of any resource in its best alternative use is called _________ cost of that resource | opportuity |
| The economic cost of producing a product is the amount of money or income the firm must pay or provide to _________ to attract land,labor and capital goods away from the alternative uses in the economy. | resource suppliers |
| The monetary payments, or out-of-pocket payments are ________ cost, and the cost of self-ownened or self-employed resources are ______ cost | explicit, implicit |
| normal profit is a cost bc it is the payment that the firm must take to obtain the services of the_________. accounting profit is equal to the firms total revenue less its ______cost. | entrepreneuers,implicit |
| economic profit is not a cost and is equal to the firms total _____ less its economic _______ | revenues,cost |
| In the short run the firm can change its output by changing the quantity of the______ resources its employs, but it cant change the quantity of the ______ resources. This means that the firms palnt capacity is fixed and in the _____ and variable in the___ | variable,fixed, short run,long run |
| the law of diminishing returns is that as successive units of a ____ resource, beyond some point the ____ product of the former resource will decrease. The law assumes that all units of input are of ____ quality. | Variable, Fixed, marginal ,Equal |
| If the total increases at an increasing rate, the marginal product is ____. if it increases at a decresing rate, the marginal product is ____, but ______ | rising, positive, falling |
| if the total product is at a maximum, the marginal product is ____,but if it decreases ,the marginal product is ____ | Zero, Negative |
| if the marginal product of any input exceeds its average product, the average product is ____, but if it is less than its average product, the average product is at a ____ | rise, falling, maximum |
| those cost that in total do not vary with the changes in output are____cost,but those cost that in total change with the level of output are ____cost. the sum of fixed and variable cost at each level of output is ____cost. | fixed,variable,total |
| the law of dimisnishing returns explains why a firms average variable, average total, and marginal cost may at first tend to____but ultimately_____as the output of the firm increases | decrease,increase |
| marginal cost is the increase in____variable cost or____cost that occurs when the firm increases its output by one unit | total,total |
| if the marginal cost is less average variable cost, average variable cost will be____ but if the average variable cost is less than the marginal cost,average variable cost will be_____ | falling,rising |
| Assume that labor is the only variable input in the short run and that the wage rate paid to labor is constant:When the marginal product of labor is rising, the marginal cost of producing a product is______ | falling |
| Assume that labor is the only variable input in the short run and that the wage rate paid to labor is constant:when the average variable cost of producing a product is falling, the average product of labor_____ | rising |
| Assume that labor is the only variable input in the short run and that the wage rate paid to labor is constant:at the outputat which marginal cost is at a maximimum, the marginal of labor is at a ____ | maxiximum |
| Assume that labor is the only variable input in the short run and that the wage rate paid to labor is constant:at the output at which the average product of labor is at a maximum, the average variable cost of producing the product is at a ____ | minimum |
| Assume that labor is the only variable input in the short run and that the wage rate paid to labor is constant:at the output at which the average variable cost is at a minimum, average variable cost and ____cost are equal and aver product and ____ are = | marginal,marginal |
| changes in either resource prices or technology will cause cost curves to_____ | shift |
| if the average fixed cost increase, then the average fixed cost curve will_____and the average total cost curve will_____but the average variable cost curve will_____and the marginal cost curve will_____ | shift up,shift up,remain unchanged,remain unchanged |
| if the average variable cost increase,then the average variable cost curve will____and the average total cost curve will____and the marginal cost curve will____but the average fixed cost curve would____ | shift up,shift up,shift up,remain unchanged |
| the short run cost of a firm are fixed and variable cost,but in the long run all cost are____. | variable |
| the long run average total cost of producing a product is equal to the lowest of the short-run cost of producing that product after the firmhas had all the time it requires to make the appropriate adjustments in the size of its______ | plant |
| List 3 important sorces of economies of scale: | 1.labor specialization 2.managerial specialization 3.more efficient use |
| when a firm experiences diseconomies of scale, it has_____average total cost as output increases. | higher |
| where diseconomies of scale are operative , an increase in all inputs will cause a____-than-proportionate increase in output.the factor that gives rise to large diseconomies of scale is managerial_____ | less,difficulties |
| the smallest level of output at which a firm can minimize long-run average cost is____efficient scale. | mininmum |
| realtively large and small firms could coexist in an industry and be equally viablewhen there is an extended range of_____returns to scale. | constant |
| in some idustries, the long-run average cost curve will____over a long range of output and efficient production will be achieved with only a few_____firms. | decrease,large |
| the conditions for a natural monopoly are created when_____of scale extend beyond the market size so that unitcosts are minimized by having a single firm produce a product. | economies |
| T or F:the economic cost of a firm are the payments it must make to resource owners to attract their resources from the alternative employment. | True |
| T or F:economic or pure profit is an explicit cost,while normal profit is an implicit cost. | False |
| T or F:in the short run the size(or capacity) of a firms plant is fixed | True |
| T or F:The resources employed by a firm are all variable in the long run and all fixed in the short run | False |
| T or F:The law of dimisnishing returns states that as successive amounts of a variable resource are added to the fixed resource, beyond some point total output will diminish. | False |
| T or F:An assumption of the law of diminishing returns is that all units of variable inputs of equal tranquility. | True |
| T or F:When total product is incresing at a decreasing rate,marginal product is positive and increasing | False |
| T or F:When average product is falling,marginal product is greater than average | False |
| T or F:When marginal product is negative,total production (or output)is decreasing | True |
| T or F:The larger the output of a firm, the smaller the fixed cost of the firm | False |
| T or F:The law of diminishing returns explains why increases in variable cost associated with each 1-unit increase in output become greater and greater after a certain point | True |
| T or F:Fixed cost can be controlled or alterned in the short run | False |
| T or F:Total cost is the sum of fixed and variable cost at each level of output | True |
| T or F:Masrginal cost is the change in fixed cost divided by the change in output | False |
| T or F:The marginal cost curve intersects the average total cost (ATC) curve at the ATC curve's minimum point | True |
| T or F:If the fixed cost of a firm increases from one yr to next )bc the premium it mus pay for the insurance on the buildings it owns has been increased) while its variable cost schedule remains unchngd, its marginal cost schedule will also remain unchgd | True |
| T or F:Marginal cost is equal to average variable cost at the output at which average variable cos is at a minimum | True |
| T or F:WHen the marginal product of a variable resource increase,the marginal cost of producing the product will decrease,and when marginal product decreases, marginal cost will increase | True |
| T or F:If the price of a variable inpit should increase, the avergae variable cost,average total cost,and marginal cost curve would all shift upward,but the position of the average fixed cost curve would remain unchanged. | True |
| T or F:One explanation why the long-run average total cost curve of a firm rises after some level of output has been reached is the law of dimisnishing return. | False |
| T or F:If a firm increases all its inputs by 20% and its output increases by 30%,the firm is experiencing economies of scale | True |
| T or F:The primary cause of diseconomies of scale is increased specialization of labor | False |
| T or F:If a firm has constant returns to scale in the long run, the total cost of producing its product does not change when it expands or contracts its output | False |
| T or F:Minimum efficient scale occurs at the largest level of output at which a firm can minimize long-run average cost | False |
| T or F:The fundamental reason that newspapers have such low prices is the low production cost from economies of scale | True |
| Suppose that a firm produces 10,000 units and sells them all for $5 each.The explicit cost of production are $350,000 and the implicit cost of production are $100,000.the firm has an accounting profit of.... | $150,000 and an economic profit of $50,000 |
| Economic profit for a firm is defined as the total revenue of the firm minus its.... | Economic cost |
| Which would best describe the short run for a firm as defined by economist? | The plant capacity for a firm is fixed |
| Which is most likely to be a long-adjustment for a firm that manufactures golf carts on an assembly line basis? A.an increase amount of steel the firm buys B.A change from the production of golf carts top motorcycles | B |
| the change in total product divided by the change in resource input defines.... | marginal product |
| because the marginal product of a variable resource intitally increases and later decreases as a firm increases its output,... | average variable cost decreases at first and then increases |
| because marginal product of a resource at first increases and then decreases as the output of the firm expand increases | total cost at first increases by decreasing amounts and then increases by increasing amounts |
| Marginal cost and average variable cost are equal at the output at which.... | average product is a maximum |
| average variable cost may be either increasing or decreasing when... | average fixed cost is decreasing |
| why does the short-run marginal cost curve eventually increase for the typical firm? | the law of diminishing returns |
| If the price of labor or some other variable resource increased,the... | AFC curve would shift downward |
| at an output of 10,000 units per yr,a firms total variable cost are 50,000 and its average fixed cost are $2 per yr. the total cost for the firm are.... | $70,000 |
| a firms has total fixed cost of $4,000 a year. The average variable cost is $3.00 for 2000 units of output. At this level of output,its average total cost are... | $5.00 |
| if you know that total fixed cost is $100, total variable cost is $300 and total product is 4 units,then... | average variable cost is $75 |
| if the short run average variable cost of production for a firm are falling, then this indicates that.... | marginal cost are below average variable cost |
| if the long run average total cost curve for a firm is downsloping,then it indicates that there... | are economics of scale |
| which factor contributes to the economies of scale? | greater specialization in management of a firm |
| a firm is encountering constant returns to scale when it increases all its inputs by 20% and its output increases by... | 20% |
| if economies of scale are limited and diseconomies appear quickly in an industry, then minimum efficient scale occurs at a... | low level of output and there will be many firms |
| The Four market models examined in this and the next two chapters are: | 1.pure compeition 2.pure monopoly 3.monopolistic competition 4.oligopoly |
| The four market models differ in the terms of the____of firms in the industry,whether the product is_____or_____ and how easy or difficult it is for new firms to____the industry | number,standardized,differentiated,enter |
| what are 4 specific conditions that characterize pure competition? | 1.large # of sellers 2.a standarized product 3.firm of price taker 4.free entry and exit of firms |
| The individual firm in a purely competitive industry is a price____and finds that a demand for its product is perfectly_____ | taker,elastic |
| The firms demand schedule is also a____schedule.The price per unit to the seller is_____revenue;price multiplied by the quantity the firm can sell is_____revenue;and the extra revenue that results from selling one more unit of output is _____revenue | revenue,average,total,marginal |
| In pure competition,product price____as an individual firms output increases.Marginal revenue is____product price. | is constant,equal to |
| Economic profit is total revenue____total cost.If the firm is making only a normal profit, total revenue is____total cost. In the latter case,this output level is called the____point by economist. | minus,equal to,break-even |
| If a purely competitive firm produces any output at all, it will produce that output at which its profit is at a____or its loss is at a____.or said another way,the output at which marginal cost is____marginal revenue | maximum,minimum,equal to |
| A firm will be willing to produce at an economic loss in the short run if the price which it recieves is greater than its average____cost. | variable |
| In the short run, the individual firms supply curve in pure competition is that portions of the firms_____cost curve which lies____the average variable cost curve. | marginal,above |
| The short run market supply curve is the____of the_____supply curves of all the firms in the industry. | sum,short run |
| In the short run in a purelycompetitive industry,the equilibrium price is the price at which quantity demanded is equal to____,and the equalibrium quantity is the quantity demanded and_____at the equilibrium price. | quantity supplied,quantity supplied |
| In a purely competitive industry, in the short run the number of firms in the industry and the sizes of their plants are____,but in the long run they are____ | Fixed,variable |
| When a purely competitive industry, in the long run equilibrium, the price that the firm is paid for its product is equal to____revenue,and to the long run____cost.In this case, the long run average cost is at a____ | average,average,minimum |
| an industry will be in a long run equilibrium when firms are earning____profits,but firms tend to to enter an industry if the firms in the industry are earning____profits.Firms will tend to leave and industry when they are realizing economic____ | normal,economic,losses |
| if the entry of new firms into an industry tends to raise the cost of all firms in the industry,the industry is said to be_____cost industry.its long run supply curve is_____ | an increasing-,upsloping |
| if the entry of new firmsinto an industry tends to lower costs of all firms in the industry, the industry is said to be____cost industry.Its long run supply curve is______ | a decreasing-,downsloping |
| The purely competitive economy achieves productive efficiency in the long run bc price and_____cost are equal and the latter ia at a_____ | average,minimum |
| In the long run the purely competitive economy is allocatively efficient bc price and____cost are equal | marginal |
| one of the attributes of purely competitive markets is their ability to restore____when disrupted by changes in the economy. | efficiency |
| The invisible hand also operates in a competitive market system bc it____the profits of individual producers and at the same time the system creates a pattern of resource allocation that____consumer satisfaction | maximizes,maximizes |
| T or F:The structures of the markets in which business firms sell their products in the U.S economy are very similar. | False |
| T or F:There are significant obstacles to entry in a purely competitive industry | False |
| T or F:Only in a purely competitive industry do individual firms have no control over the price of their product | True |
| T or F:Imperfectly competitive markets are defined as all markets except those that are purely competitive | True |
| T or F:One reason for studying the pure competition model is that most industries are purely competitive | False |
| T or F:The purely competitve firm views an average revenue schedule as identical to its marginal revenue schedule | True |
| T or F:The demand curves for firms in a purely competitive industry are perfectly inelastic | False |
| T or F:Under purely competitive conditions, the product price charged by the firm increases as output increases | False |
| T or F:The purely competitive firm can maximize its economic profit(or minimize its loss) only by adjusting its output | True |
| T or F:Economic Profit is the difference between total revenue and average value | False |
| T or F:The break even point means that the firm is realizing normal profits,but not economic profits | True |
| T or F:a purely competitve firm that wishes to produce and not close down will maximize profits or minimize losses at that output at which the marginal cost and marginal revenue are equal | True |
| T or F:assuming that the purely competitive firm chooses to produce and not close down,to maximize profits or minimize losses it should produce at that point where price equals average cost | False |
| T or F:If a purely competitve firm is producing output less than its profit-maximizing output,marginal revenue is greater than marginal cost | True |
| T or F:If at the profit-maximizing level of output for the purely competitive firm, price exceeds the minimum average variable cost but is less than average total cost,the firm will make profit | False |
| T or F:A purely competitive firm will produce in the short run the output at which marginal cost and marginal revenue are equal provided that the price of the product is greater than its average variable cost of production | True |
| T or F:the short run supply of a purely competitive firm tends to slope upward from the left to right bc of the law of diminishing returns | True |
| T or F:If a purely competitive firm is in a short run equilibruium and its marginal cost is greater than its average total cost, firms will leave the industry in the long run | False |
| T or F:When firms ina purely competitive industry are earning profits that are less than normal,the supply of the product will tend to decrease in the long run | True |
| T or F:The long run supply curve for a competitive,increasing industry is upsloping | True |
| T or F:Pure competition,if it could be achieved in all industries in the economy,would result in the most efficient allocation of resources | True |
| T or F:Under conditions of pure competition,firms are forces to employ the most efficient production methods available to survive | True |
| The marginal cost of producing a product are society's measure of the marginal worth of alternative products | True |
| T or F:In a purely competitive market,product price measures the marginal benefit,or additional satisfaction,that society obtains from producing additional units of the product | True |
| T or F:Pure competition minimizes the consumer and product surplus | False |
| For which market model are there a very large number of firms? | Pure competition |
| in which market model is the individual seller of a product a price taker | Pure competition |
| WHich industry comes closest to being purely competitive? wheat,shoes,automobiles,or electricity? | Wheat |
| In a purely competitive industry... | new firms are free to enter and existing firms are able to leave the industry very easily |
| The demand schedule or curve confronted the individual purely competitive firm is... | perfectly elastic |
| total revenue for producing 10 units of output is $6. Total revneue for producing 11 units of output is $8.Given this info,the.... | average revenue for producing the 11th unit is $2 |
| in pure competition,product price is... | equal to marginal value |
| Suppose that wen 2000 units of output r produced the marginal cost of the 2001st unit is $5. This amount is equal to the min of average total cost,& marginal cost is rising.if the optimal level of output in the short run is 2500 units, then at that level, | marginal cost is greater than $5 and marginal cost is greater than the average total cost |
| The zebra inc, is selling in a purely competitive market.Its output is 250 units,which sell for $2 each. at this level of output,marginal cost is $2 and average variable cost is $2.25. The firm should... | produce zero units of output |
| the individual firm's short supply curve is that part of its marginal cost curve lying above its... | average variable cost curve |
| which statement is true of a purely competitive industry in short run equilibrium? 1.price is equal to average total cost 2.total quantity demanded is equal to total quantity supplied 3.profits in the industry are equal to zero | 2.total quantity demanded is equal to total quantity supplied |
| assume that the market for wheat is purely competitive.Currently, firms growing wheat are experiencing economic losses.In the long run,we can expect this markets.... | supply curve to increase |
| the long run supply curve under pure competition will be... | horizantal in a constant-cost industry and upsloping in an increasing-cost industry |
| the long run curve in a constant-cost industry will be... | perfectly elastic |
| in a decreasing-cost industry,the long run.... | supply would be downsloping |
| increasing-cost industries find that their cost rise as a consequence of an increased deman for the product bc of... | higher resource prices |
| when a purely competitive industry is in a long run equilibrium,which statement is true? 1.firms in the industry are earning normal profits 2.price and long run average total cost are not equal to each other 3.marginal cost is at its minimum level | 1.firms in the industry are earning normal profits |
| which triple identity results in the most efficient use of resources? 1.P=mc=minimum ATC 2.P=AR=MR 3.P=MR=minimum MC 4.TR=MC=MR | 1.P=mc=minimum ATC |
| If theres an increase in demand for a product in a purely competitive industry,its results in an idustry... | expansion that will end when the price of the product is equal to its marginal cost |
| an economy is producing goods most wanted by society when, for each and every good , its.... | price and marginal cost are equal |
| The idea of the "invisible hand" operating in the competitive market system means that... | there is a unity of private and social interest that promotes efficiency |
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