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EC140 Chapter Notes - Chapter 20: Retained Earnings, Externality, Gdp Deflator

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blushlizard741
23 Jan 2017
School
WLU
Department
Economics
Course
EC140
Professor
David Johnson

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EC140 Full Course Notes
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Document Summary

Production happens in stages; some firms produce outputs that are used as inputs by other firms, and these other firms, produce outputs that are used as inputs yet by other firms. Double counting- the error that would arise in estimating the nation"s output by adding all sales of all firms. Intermediate goods- all outputs of some firms that are used as inputs for other firms. Final goods- products that are not used as inputs for other firms but are produced for consumption. Value added- the value of a firm"s output minus the firm"s inputs that it purchases form other firms. Value added is the correct measure of each firm"s contribution to total output. The value of domestic output is equal to the value of the expenditure on that output and is also equal to the total income claims generated by producing that output. Gdp- the total value of goods and services produced in the economy during a given period.

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Related Questions

1. Productivity is defined as the quantity of

a. labor required to produce a nation's GDP.

b. goods and services produced per unit of time.

c. labor required to produce one unit of goods and services.

d. goods and services produced from each unit of labor input.

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2. When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

a.Β the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.

b. all firms will go out of business since consumers will not pay prices that enable firms to cover their total production costs.

c.Β some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs.

d.Β the firms will suffer long-run economic losses.

Β 

Β 

Β 

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1. The slope of the total product curve measures

a. the marginal rate of technical substitution.

b. marginal product.

c. average product.

d. the maximum average product.

e. minimum product.

2. The Law of Diminishing Returns to a variable input (such as labor) assumes that

a. there is at least one fixed input.

b. all inputs are changed by the same percentage.

c. the firm is operating in the short run.

d. all inputs are held constant.

e. a and c.

3. An isoquant curve identifies

a. the maximum output possible, given a fixed budget.

b. the different combinations of goods the can be produced, given fixed amounts of inputs.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

d. none of the above.

4. The ratio of total productivity to the total quantity of a variable input being used in production is

a. equal to marginal physical productivity of the input.

b. constant as employment levels of the input vary.

c. equal to average physical productivity of the input.

d. equal to the marginal rate of technical substitution.

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.