Econ2020

Front 1

The amount a firm recieves for the sale of it's products

Back 1

total revenue (TR)

Front 2

the market value of the inputs a firm uses in production

Back 2

total cost (TC)

Front 3

Profit=

Back 3

TR-TC

Front 4

the increase in the quantity of output obtained from one additional unit of that input

Back 4

marginal product (MP)

Front 5

the _____ _____ is upward sloping, meaning ________.

Back 5

production function; meaning that output increases as input increases.

Front 6

the output increases at a decreasing rate. or in other words, the marginal product (MP) of input decreases as output increases.

Back 6

diminishing marginal product

Front 7

graphs the quantity produced on the horizontal axis & total cost on the vertitcal axis

Back 7

total cost curve

Front 8

costs that do not vary with the quantity of output produced, such as the cost to build a factory

Back 8

fixed costs

Front 9

costs that change as the firm alters the quantity of output produced, such as labor cost.

Back 9

variable costs

Front 10

total cost (TS)=

Back 10

fixed cost + variable cost

Front 11

marginal cost (MC)=

Back 11

CHANGE in TC/CHANGE in Q

Front 12

rising MC curve reflects..

Back 12

diminishing marginal product

Front 13

the average total cost (ATC) curve has a __ shape.

Back 13

U

Front 14

ATC=TC/Q=

Back 14

(FC+VC)/Q=AFC+AVC

Front 15

the ATC curve first declines because

Back 15

the falling AFC curve dominates the AVC

Front 16

later, ATC rises because

Back 16

the rising AVC dominates the AFC

Front 17

whenever MC is less that ATC,

Back 17

ATC is falling

Front 18

whenever MC is greater than ATC,

Back 18

ATC is rising

Front 19

MC curve crosses the ATC curve

Back 19

at it's minimum

Front 20

the long-run ATC curve is much _____ U-shape than the short-run ATC

Back 20

flatter

Front 21

all the short-run curves lie ___ or ___ the long-run curve. why?

Back 21

on or above; because firms have more flexibility in long-run

Front 22

when long-run ATC declines, as output increases, there is said to be

Back 22

economics of scales

Front 23

when long-run ATC rises as output increases, there is said to be

Back 23

diseconomics of scales

Front 24

when long-run ATC does not change as output increases, there is said to be

Back 24

constant returns to scale

Front 25

average revenue (AR)

Back 25

TR/Q

Front 26

marginal revenue (MR)

Back 26

CHANGE in TR/CHANGE in Q=P (only in competitive relationships)

Front 27

at Q*MR=

Back 27

MC (holds true for all firms including those in a non-competitive market)

Front 28

at Q*MR=MC=

Back 28

P (only for competitive market firms)

Front 29

rational decision makers think

Back 29

at margin.

Front 30

the supply curve of a competitive firm is givem by

Back 30

a portion of its MC curve

Front 31

in short run, a firm shuts down if

Back 31

TR<VC, or P<AVC. as a result, the short-run supply curve for an individual firm is the MC curve above the AVC.

Front 32

in long run, a firm exists if

Back 32

TR<TC, or a firm exits when P<ATC.

Front 33

at the long-run equilibrium, the number of firms

Back 33

will not change

Front 34

long-run equilibrium is only possible if.. P=

Back 34

MC=ATC

Front 35

if we assume all the firms in the market are the same & have the same cost curve, then the long-run supply curve of a competitive market is

Back 35

a horizontal line passing the lowest point of the ATC curve

Front 36

a firm that is the sole seller of a product without close substitutes

Back 36

monopoly

Front 37

monopoly arises for 3 reasons:

Back 37

1. a key resource is owned by a single firm
2. gov. gives single firm the exclusive right
3. natural monopoly: the cost of prod. makes a single producer more efficient than a large number of producers

Front 38

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Back 38

natural monopoly

Front 39

for all firms, average revenue equals

Back 39

the price of the good.

Front 40

for competitive firms, marginal revenue equals

Back 40

the price of the good

Front 41

if MR is greater than MC, the firm should

Back 41

increase it's output

Front 42

if MC is greater than MR, the firm should

Back 42

decrease it's output

Front 43

at the profit maximizing level of output, MC & MR are

Back 43

exactly equal

Front 44

a firm should shut down if

Back 44

P<AVC

Front 45

a cost that has already been committed & can't be recovered

Back 45

sunk cost

Front 46

a firm should exit the market if

Back 46

P<ATC

Front 47

a firm should enter the market if

Back 47

P>ATC

Front 48

the process of entry & exit only ends when

Back 48

price & ATC are driven to equality