ECON101 Lecture Notes - Average Variable Cost, Average Cost, Marginal Revenue

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sangriaelephant293

16 Dec 2013

School

University of Alberta

Department

Economics

Course

ECON101

Professor

Alexander Gainer

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ECON101 Full Course Notes

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There are two types of cots in the market: explicit costs and implicit costs. These two types of costs determine the types of profits: accounting profit and economic profit. Explicit costs require firms to pay money. Implicit costs can be things like opportunity costs. Accounting profit = total revenue total explicit costs. Economic profit = total revenue total costs (explicit + implicit) Fixed costs doesn"t vary with quantity of output. The production function can be used to determine many things such as the marginal product of labor and marginal cost. The marginal product of labor shows how much extra/less one will get for hiring another worker, this helps determine a company"s decision to hire more workers. The marginal cost shows how much more/less one will get for producing one more unit. Mpl = slope of the production function. In this chapter, people use words like average variable costs or average total costs.

Related Questions

A perfectly competitive lemonade producer faces the following marginal product of labor (MPL) function:

MPL = 13 â 3*L

Where L is the quantity of labor (in hours) used by this firm. The market price lemonade is $2 / glass, and the market wage is $2 / hour. To maximize profits, this firm should hire:

		A. Zero hours of work, because one labor hour costs as much as the revenue from a single glass of lemonade.
		B. Six hours of work, because the seventh has a negative MPL.
		C. Four hours of work, because the fifth adds more to costs than to revenues.
		D. One hour of work, because the second hour is less productive than the first.

Which of the following would cause the market supply curve of a good or service to shift?

Select one:

a. A change in the quantity demanded of the product

b. A change in the cost of labor to make the product

c. A change in the number of consumers

d. a change in the selling price of the product

Question 2

Question text

Which of the following generally decreases the supply of a product?

Select one:

a. The cost of making the product decreases

b. The selling price of the product increases.

c. More and more producers of the product enter the market

d. The tax on the product increases

Question 3

Question text

When considering the stages of production, which of the following is true?

Select one:

a. When marginal product becomes negative, the workers are getting in each othersâ way.

b. in producing a good, it is always a good idea to have at least 4 or 5 people at every level of production.

c. The more workers that are hired, the more efficient the production

d. The principle of diminishing returns explains that the fewer workers in a factory, the more likely the company is to be successful

Question 4

Question text

Total cost is the sum of

Select one:

a. fixed and variable costs

b. Marginal costs and marginal product

c. Fixed costs and marginal product

d. Marginal costs and income tax costs

Question 5

Question text

A company is maximizing profit when marginal revenue

Select one:

a. Equal to marginal cost

b. Is two times the marginal cost

c. Is one â half of marginal cost

d. Less than marginal cost

1. In a market economy, the high salaries of some star baseball players such as Adrian Gonzalez, are determined by

		Team owners, based on the total number of star athletes they plan to hire.
	B	advertising companies, based on what they are willing to pay to advertise their products at baseball games.
	C	the interaction of the demand for star athletes and the supply of star athletes.
	D	consumers, based on their willingness to watch baseball games.

2. Demand in factor markets differs from demand in product markets in that

	A	the demand for a factor of production is difficult to determine.
B		the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers.
C		demand for a factor of production is based on the tastes and preferences of firms.
D		demand for a factor of production is based on the tastes and preferences of resource owners.

3. The demand for labor is described as a derived demand because

A		it is derived by workers seeking to earn income to fund the consumption of goods and services.
B		it is derived by producers seeking to make profits by starting new businesses.
C		it is derived from the demand for products that use labor in the production process.
D		it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

4. Which of the following is not an example of a derived demand?

A		Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators.
B		Seth Bullock, a personal injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages.
C		Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market.
D		As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

5. Marginal revenue product for a perfectly competitive seller is equal to

A		the output price multiplied by the total product of labor.
B		the output price multiplied by the number of workers hired.
C		the change in total revenue that results from hiring another worker.
D		the marginal cost of production.

6. What is the difference between labor's marginal product and marginal revenue product?

A		The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.
B		The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker.
C		The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
D		Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

7. What is the difference between a firm's marginal revenue and its marginal revenue product?

A		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker.
B		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker.
C		Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in the marginal product when a firm hires an additional worker.
D		There is no difference between the two terms.

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ECON101 Lecture Notes - Average Variable Cost, Average Cost, Marginal Revenue

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