ECON 1000 Chapter Notes - Chapter 10: Opportunity Cost, Cost, Factors Of Production

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alanw

10 Jan 2020

School

York University

Department

Economics

Course

ECON 1000

Professor

Karen Bernhardt-Walther

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ECON 1000 Full Course Notes

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A firm that fails to do so is either eliminated or taken over by another firm: accounting profit, depreciation is the fall in the value of a firm"s capital. Depreciation is calculated by using the rules set by whatever tax agency is in charge: profit=revenue total costs depreciation, e. g. For most firms, capital, land, and entrepreneurship are fixed with labour being variable. We call these fixed factors the firm"s plant: short-run decisions are easily reversed. Output can be increased or decreased by increasing or decreasing labour: the long run, a time frame in which the quantity of all production factors can be varied. A firm"s plant is not fixed but instead variable. Only the points on the curve are attainable and efficient: marginal product, the increase in total product resulting from a one-unit increase in labour quantity. Separated into total fixed cost and total variable cost: total fixed cost is the cost of the firm"s fixed factors.

Related Questions

Chapter 2: The Firms and its Goals

1. Why does a firm perform certain functions internally and others through the market? Provide instances of both functions in your work place.

2. What is profit maximization hypothesis? Is this the goal of the firm you work for?

3. What is the difference between optimizing and satisficing? What firms do in reality?

4. How do we measure risk and how do we calculate stockholderâs wealth?

5. How implicit costs and opportunity costs differentiate financial profits from economic profits?

6. Explain how the Economic Value Added is the closest measure for economic profit?

burgundypug28

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

1-7 True or False

1) In the short run, a perfectly competitive firm can earn positive, zero, or negative profit depending on the market price of the firm's output.

2)In the model of the perfectly competitive firm, the firm's fixed costs are equal to its implicit costs of production.

3)Assume the market price is greater than average total cost at the perfectly competitive firm's profit-maximizing level of output. In this case, the firm is earning positive economic profits, which act as an incentive for new firms to enter the market.

4)Assume that at the current level of output, price equals marginal revenue, but is less than average total cost. So long as price is greater than average variable cost, the firm should continue to operate in the short run to minimize its losses.

5)The fact that a firm is a price-setter does not ensure it will make a positive economic profit in the short run and over time.

6)Barriers to entry serve to limit the number of firms that operate in a particular market and, as 11) such, reduce the amount of total profit earned in the market.

7)In the prisoner's dilemma game, each player's dominant strategy is also the Nash equilibrium.

14-17 Multiple Choice

14) Marginal revenue is equal to:
A) the change in P x Q due to a one unit change in output. B) the change in quantity divided by the change in price.

C) the change in price divided by the change in output. D) price, but only if the firm is a price searcher.

15) In order to maximize its profits, a price-taking firm should produce the level of output at which:

A) marginal revenue = marginal cost. B) total revenue = total cost.

C) variable revenue = variable cost. D) average revenue = average cost.

16) Assume that there is an improvement in the technology used by firms in a perfectly competitive industry that is initially in long-run equilibrium. In the short run this would cause:

A) cannot be determined with the information given. B) no change in the firm's economic profit.
C) a decrease in the firm's economic profit. D) an increase in the firm's economic profit.

17) Assume at the firm's profit-maximizing level of output P = AVC. In this case, the firm will be:

A) incurring an economic loss. B) earning a positive economic profit.

C) earning economic profit = 0. D) breaking even.

ECON 1000 Chapter Notes - Chapter 10: Opportunity Cost, Cost, Factors Of Production

ECON 1000 Full Course Notes

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