01:220:102 Lecture Notes - Lecture 10: Production Function, Marginal Cost, Economic Surplus

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Pes = measures responsiveness of qs to change in p. Pes = % change in qs / % change in p. In short run, can"t change capital, therefore can"t leave industry however, you can shut down & choose to make nothing: in long run, you can enter/exit markets. Xed: marginal cost curve above min of avc. Short run = some factors of production are xed. Long run = all factors are variable: planning period (what is optimal level of capital) Production function: relationship btwn maximum output attainable & quantities of labor & capital (capital = xed, labor = variable) Constant returns to scale (minimum ef cient scale: atc does not change as output increases. Diseconomies of scale: atc increases as output increases. Shift right = increase in supply, decrease in price. Continue to produce up to point where cost of making next unit = bene t of making that unit. Zero econ. pro t = positive accounting pro t.

Related Questions

10-When marginal cost is greater than average total cost,
A. Average total cost must be increasing with output
B. Average variable cost must be decreasing with output
C. Average fixed cost must be increasing with output
D. Marginal cost must be increasing with output

11-If a firm's demand curve falls below its AVC curve, then the firm should
A. Shut down now
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Shutdown in the long-run

12- The demand curve facing a perfectly competitive firm is
A. Upward sloping
B. Perfectly inelastic
C. Downward sloping
D. Perfectly elastic

13-If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. Should shut down
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Operate in the short run and the long run

14-At the output where MC = ATC = P, the perfectly competitive firm
A. Should shutdown
B. Has no economic profit
C. Is not profit maximizing
D. Should raise output

ivorybee159

Consider a market with many firms that have different cost structures.

Unless shutdown or exit is optimal, every firm expands production until ___________.

marginal product is maximized.

B. marginal revenue, marginal cost, and price are all equal

(MR = MC = P)

C. marginal revenue is equal to the minimum of the short-run average total cost.

D. marginal cost is minimized.

To construct the supply curve in a market with many firms with different cost structures, the ___________.

individual supply curves for each firm are added together.

individual average variable cost curves are added together.

minimums of theâ firms' marginal cost curves are linked together.

minimums of theâ firms' long-run average total cost curves are linked together.

The equilibrium price is the ___________.

âlong-run average total cost of the last entrant into the market.

the average marginal cost of the firms.

the long-run average total cost of the first entrant into the market.

minimum of the average variable cost of the smallest firm in the market.

In terms of economic profits, early market entrants earn

(negative

zero

positive)

economic profits and the last entrant earns

(negative

zero

positive)

economic profits.

A perfectly competitive firm will choose to shut down when the (price (marginal revenue)/ average total cost) intersects the marginal cost curve below the ( total cost curve average variable cost curve ).

Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the average variable cost curve below marginal cost. B. the portion of the average variable cost curve above marginal cost. C. the portion of the marginal cost curve above the average total cost. D. the portion of the marginal cost curve above average variable cost.

In the long run, the supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the marginal cost curve above the average total cost. B. the portion of the marginal cost curve above average variable cost. C. the portion of the average variable cost curve below marginal cost. D. the portion of the average variable cost curve above marginal cost.

mauvemacaw466

7.) At the level of output where marginal revenue equals marginal cost, assume that the price of a competitive firm's product is between the firm's average total cost curve and its average variable cost curve. In this case the firm would
A. decrease output to reduce the costs.
B. continue to operate in the short run.
C. shut down.
D. increase output to increase profit.
8.) The lowest point on the firm's long-run supply curve is
A. the shutdown point.
B. the break-even point.
C. between the shutdown point and the break-even point.

01:220:102 Lecture Notes - Lecture 10: Production Function, Marginal Cost, Economic Surplus

01:220:102 Full Course Notes

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