ECON 10010 Chapter Notes - Chapter 13: Production Function, Average Cost, Cost Curve

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periwinklechimpanzee451

6 Dec 2017

School

Department

Economics

Course

ECON 10010

Professor

Kirk Doran

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Negative economic profit: fail to earn enough revenue. Production and costs: the production function, assumption: size of the firm is fixed and the quantity produced only changes by the number of employees, production function: relationship between quantity of inputs and outputs. Input: workers: production function gets flatter as the number of workers increases, marginal product: the increase in output that arises from an additional unit of input. The various measures of cost: fixed and variable costs, fixed costs: costs that do not vary with the quantity of output produced. Happen even if there is no output. Rent, salaries paid: variable costs: costs that vary with the quantity of output produced. Depend on the amount of output produced. Average total cost tells us the cost of a typical unit of output if total cost is divided evenly over all the units produced. Upward slope reflects the property of diminishing marginal product: u-shaped average total cost.

Related Questions

Question:

Evaluate the following statement:

In the short-run, information about a perfectly competitive firm's fixed costs is needed to determine both the profit-maximizing level of output and the amount of profit earned when producing that level of output.

Answer:

The objective of a firm is to maximize profits. In determining output, the firm may be subject to two constraints: costs of production and consumer demand. The price that a perfectly competitive firm may sell its products, is determined by consumer demand. Production costs are determined by the technology used. Profits are the difference between total revenues and total costs. Pertaining to short-run profit maximization, firms maximize profits by choosing the output level where its marginal revenue equals its marginal cost.

Farnham, P. G. (2014). Economics for Managers (3rd Ed.).

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sangriacockroach968

Explain implicit and explicit costs as applied to profit. Include examples to support your explanation. 2. Explain âTotal costs increases as output expands. But the rate of cost increase varies.â Explain with an example. 2. Explain, âFor perfectly competitive firms, profits are maximized at the rate of output where price equals marginal costâ Remember profit is considered a cost. Explain with an example. 3. Explain why supply is affected by: 1. The price of factor inputs-labor, capital, resources. 2. Technology â for example computers and robots. 3. Expectations- what is going to happen with the demand for the product thus supply. Ex. a recession 4. Taxes and subsidies-include examples. 5. If one firm making and selling X product and is earning excessive profits how will the eventually effect the market price and the supply of the product? Page 519

A. A competitive firm

can consider only its location in setting the price.
must base its competitive price on product differentiation.
has the ability to set its own price.
must accept the price determined by the intersection of the market supply and demand curves.
has no supply curve.

B. If a firm is making an economic profit, then

the factors of production are being paid their opportunity costs.
there will be no change in the number of firms if the industry is perfectly competitive.
the factors of production are being paid less than their opportunity costs.
the factors of production are being paid more than their opportunity costs.
the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

shut down because economic profits are negative.
continue to produce as long as P > AVC.
continue to produce because accounting profits are positive.
set a higher price for its output.
set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

the marginal revenue curve.
perfectly inelastic.
always equal to marginal cost.
the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

monopolistic
oligopolistic
monopolistically competitive
perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

total revenue will fall if the price increases.
total revenue will be unchanged if the price increases.
total revenue will rise if the price increases.
the total supply will increase by an equal amount if demand increases.
the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

monopoly.
perfect competition.
theories of consumer behavior.
imperfect competition.
the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

perfect competition
monopolistic competition
oligopoly
monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

economic profits are zero.
TR > TC.
TR < TC.
P = AVC.
normal profits are zero.

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ECON 10010 Chapter Notes - Chapter 13: Production Function, Average Cost, Cost Curve

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