ECON 1100 Lecture Notes - Lecture 7: Opportunity Cost, Diminishing Returns, Marginal Product

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erinhorse521

18 Mar 2016

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What do economists assume to be the firm"s primary objective when they make those decisions: how much to make of the product, how to produce that much of the product, how much of each input to demand. What is the difference between explicit costs and implicit costs? (i. e. how does the economic definition of costs differ from the accounting definition?) Profit the difference between total revenue and total cost. (profit = tr tc) Explicit costs involve direct money outlay for production. Know the difference between labor intensive and capital-intensive technologies. Production function the relationship between quantity of inputs used to make a good and the quantity of output of that good. Total product the number of units produced from each employee hired. Marginal product the additional output that can be produced by adding one ore unit of a specific input. Average product the average amount produced by each unit of a variable factor of production.

Related Questions

(a) List and explain the properties of indifference curves.[10 marks]

(b) Explain with the aid of a diagram the income and substitution effects and use the concepts to describe what happens when the price of a product decreases. [10 marks]

(a) Carefully explain what is meant by explicit; implicit; and sunk costs. How are they used to calculate accounting profit and economic profit? [5 marks]

(b) Explain the relationship between total product, marginal product, and average product. [5marks]

(d) Define economies and diseconomies of scale and explain why they occur.

rubyoyster381

During a year of operation, a firm collects $175,000 in revenue and spends $80,000 on raw materials, labor expenses, utilities, and rent. The owners of the firm have provided $500,000 of their own money to the firm instead of investing the money and earning a 14 percent annual rate of return.

a). The explicit costs of the firm are $. The implicit costs are $. The total economic cost is $.

b). The firm's economic profit is $

c). The firm's accounting profit is $

d). If the owners could earn 20 percent annually on the money they have invested in the firm, the economic profit of the firm would be______ (when revenue is $175,000).

earnsacquire or deserve by one's efforts or actionsMore (Definitions, Synonyms, Translation)

skymuskrat620

26. To the economist total cost includes

A. explicit and implicit costs.

B neither implicit nor explicit costs.

C. implicit, but not explicit, costs.

D. explicit, but not implicit, costs.

27. Accounting profits are typically

A. greater than economic profits because the former do not take explicit costs into account

B. equal to economic profits because accounting costs include all opportunity costs.

C. smaller than economic profits because the former do not take implicit costs into account.

D. greater than economic profits because the former do not take implicit costs into account.

28. Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

A. $100,000 and its economic profits were $0.

B. $200,000 and its economic profits were $0.

C. $100,000 and its economic profits were $100,000.

D. $0 and its economic loss was $200,000.

29. The basic difference between the short run and the long run is that

A. all costs are fixed in the short run, but all costs are variable in the long run.

B. the law of diminishing returns applies in the long run but not in the short run.

C. at least one resource is fixed in the short run, while all resources are variable in the long run.

D. economies of scale may be present in the short run but not in the long run.

30. The law of diminishing returns indicates that

A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

B. because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped.

C. the demand for goods produced by purely competitive industries is downsloping.

D. beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

sapphirecrow883

ECON 1100 Lecture Notes - Lecture 7: Opportunity Cost, Diminishing Returns, Marginal Product

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