Bargeboe Titus
47 Questions
3 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the formula for total revenue?

  • Total Revenue = Quantity sold − Price
  • Total Revenue = Price + Quantity sold
  • Total Revenue = Price ÷ Quantity sold
  • Total Revenue = Price × Quantity sold (correct)

Which equation represents profit?

  • Profit = Total Cost − Total Revenue
  • Profit = Total Revenue − Total Cost (correct)
  • Profit = Total Revenue + Total Cost
  • Profit = Total Revenue × Total Cost

At a market price of $72, what is the profit at Q = 50?

  • Profit is variable.
  • Profit is zero.
  • Profit is maximized. (correct)
  • Profit could be negative.

Which worker yielded the highest marginal product based on the given outputs?

<p>the second worker (A)</p> Signup and view all the answers

When do economists believe products differ in value?

<p>When consumers believe they are different. (D)</p> Signup and view all the answers

What principle is used to determine the optimal amount of an activity?

<p>Marginal benefit equals marginal cost. (B)</p> Signup and view all the answers

What does an increase in the quantity of a specific input, while holding all other inputs fixed, lead to in terms of output?

<p>Diminishing marginal returns (D)</p> Signup and view all the answers

Based on the outputs provided, what is the marginal product of the third worker?

<p>11 baskets (D)</p> Signup and view all the answers

How does the marginal product of the fourth worker compare to the previous workers?

<p>Lower than the third worker (D)</p> Signup and view all the answers

What is the total output when four workers are used?

<p>50 baskets (D)</p> Signup and view all the answers

If marginal product decreases with each additional worker, what phenomenon is occurring?

<p>Diminishing returns to an input (A)</p> Signup and view all the answers

Which worker's contribution does not significantly change the total output when added?

<p>the fourth worker (C)</p> Signup and view all the answers

In terms of productivity, which aspect can marginal product directly affect?

<p>Scale of production (A)</p> Signup and view all the answers

What is the average total cost when 5 cases of salsa are produced?

<p>$81.60 (D)</p> Signup and view all the answers

At which quantity does the average total cost begin to increase according to the table?

<p>7 (B)</p> Signup and view all the answers

What is the average fixed cost per case when 3 cases of salsa are produced?

<p>$27.00 (D)</p> Signup and view all the answers

What happens to the average variable cost at 7 cases of salsa?

<p>Increases to $15.43 (C)</p> Signup and view all the answers

Which average total cost is recorded for 10 cases of salsa?

<p>$120.00 (B)</p> Signup and view all the answers

How much is the average total cost for producing one case of salsa?

<p>$120.00 (C)</p> Signup and view all the answers

What trend can be observed in average total cost as quantity increases up to 6 cases?

<p>Decreases initially, then increases (A)</p> Signup and view all the answers

What is the average variable cost for the production of 2 cases of salsa?

<p>$24.00 (A)</p> Signup and view all the answers

Considering the average costs, what is the average total cost at 9 cases?

<p>$108.00 (A)</p> Signup and view all the answers

What is the average total cost for producing 8 cases of salsa?

<p>$109.50 (C)</p> Signup and view all the answers

What should a firm do if marginal revenue (MR) is greater than marginal cost (MC)?

<p>Increase production to maximize profit (D)</p> Signup and view all the answers

When is profit maximized in a competitive market?

<p>When price (P) equals marginal cost (MC) (C)</p> Signup and view all the answers

If a firm produces at a level where MR < MC, what can it conclude?

<p>It should decrease production to improve profitability (C)</p> Signup and view all the answers

What does it indicate if producing another unit results in extra costs exceeding extra revenues?

<p>The firm should reduce or stop production (B)</p> Signup and view all the answers

How does the price-taking firm determine its optimal output level?

<p>By choosing the quantity where marginal revenue equals marginal cost (B)</p> Signup and view all the answers

What happens to profit if the firm continues to produce beyond the quantity where MR = MC?

<p>Profit decreases as costs rise faster than revenues (C)</p> Signup and view all the answers

What occurs if a firm consistently produces at a level where MC is greater than MR?

<p>Profit will decline (C)</p> Signup and view all the answers

If a firm is in a competitive market and raises its price above market equilibrium, what is likely to happen?

<p>The firm will sell fewer units than before (D)</p> Signup and view all the answers

What condition must be met for a firm to continue operating in the short run?

<p>The market price must cover at least variable costs. (A)</p> Signup and view all the answers

What happens if the market price falls below the shut-down price?

<p>The firm will stop producing in the short run. (B)</p> Signup and view all the answers

If a firm is earning normal profits, what does this indicate about its financial situation?

<p>The firm's total revenue equals its total costs. (D)</p> Signup and view all the answers

At what point do firms break even in terms of profitability?

<p>When P = minimum ATC. (A)</p> Signup and view all the answers

What is the relationship between the marginal cost curve and a firm's supply curve?

<p>The supply curve reflects the marginal cost above the shut-down price. (D)</p> Signup and view all the answers

What results when the price is greater than the minimum average total cost?

<p>The firm is profitable and may attract new entrants. (C)</p> Signup and view all the answers

What effect does an increase in fixed cost have on a firm's ability to cover costs?

<p>It has no effect on short-term production decisions. (A)</p> Signup and view all the answers

When a firm is unprofitable, what can be inferred about its market price in relation to average total cost?

<p>The market price is below minimum average total cost. (A)</p> Signup and view all the answers

What effect does increasing production have on a monopolist's revenue?

<p>It can both increase and decrease total revenue. (B)</p> Signup and view all the answers

Why is a monopolist's marginal revenue curve always below the demand curve?

<p>The monopolist must decrease the price for all units to sell an additional unit. (D)</p> Signup and view all the answers

In the given scenario, what is the marginal revenue when the monopolist increases output from 5 to 6 units?

<p>$1 (C)</p> Signup and view all the answers

Which of the following statements best describes the relationship between price, quantity sold, and marginal revenue for a monopolist?

<p>Lowering price on all units sold can reduce marginal revenue. (C)</p> Signup and view all the answers

If a monopolist is selling 5 units at $5 each, which of the following is true when it sells an additional unit?

<p>Total revenue will decrease due to the price effect. (D)</p> Signup and view all the answers

What is the likely outcome when a monopolist sells an additional unit by reducing the price?

<p>Total revenue may decrease depending on the size of the price cut. (C)</p> Signup and view all the answers

Given that the price decreases when moving from 5 units to 6 units, what generally happens to total revenue?

<p>Total revenue might increase or decrease. (A)</p> Signup and view all the answers

What should a monopolist consider when analyzing marginal revenue with an increase in output?

<p>Both quantity effect and price effect are important. (A)</p> Signup and view all the answers

Flashcards

Diminishing Returns

Adding more of one input (like workers), while keeping other inputs constant, eventually reduces the additional output produced by each extra unit of the input.

Marginal Product

The additional output gained from adding one more unit of an input, holding all other inputs constant.

Practice Question 1 - Highest Marginal Product

Determining which worker produced the most extra baskets with each additional worker hired.

Practice Question 1 Answer

The first worker, due to the diminishing returns effect, has the highest marginal product given the specified quantities of baskets produced.

Signup and view all the flashcards

Marginal Product Curve's Slope

Marginal cost (cost given an extra output unit).

Signup and view all the flashcards

Input

A factor of production employed in producing something.

Signup and view all the flashcards

Practice Question 1 - Worker 1 Output

14 baskets

Signup and view all the flashcards

Practice Question 1 - Worker 2 Output

34 baskets

Signup and view all the flashcards

Profit Maximization

The point at which a business produces the quantity of goods that generates the highest possible profit.

Signup and view all the flashcards

Marginal Analysis

A method of decision-making where businesses compare the additional benefits (marginal benefit) and additional costs (marginal cost) of producing one more unit of a product or service.

Signup and view all the flashcards

Total Revenue (TR)

The total amount of money a firm receives by selling its goods or services.

Signup and view all the flashcards

Total Cost (TC)

The total amount of money a firm spends on producing its goods or services.

Signup and view all the flashcards

Profit

The difference between total revenue and total cost.

Signup and view all the flashcards

Average Total Cost (ATC)

The total cost of production divided by the quantity of output produced.

Signup and view all the flashcards

Average Variable Cost (AVC)

The variable cost of production divided by the quantity of output.

Signup and view all the flashcards

Average Fixed Cost (AFC)

The fixed cost of production divided by the quantity of output.

Signup and view all the flashcards

Fixed Cost (FC)

Costs that do not change with the level of output.

Signup and view all the flashcards

Variable Cost (VC)

Costs that change with the level of output.

Signup and view all the flashcards

Quantity of Salsa (Q)

The number of cases of salsa produced.

Signup and view all the flashcards

Cost of Salsa Case (ATC)

Average cost per case of salsa.

Signup and view all the flashcards

Decreasing Average Total Cost

Average cost per unit falls as output increases.

Signup and view all the flashcards

Increasing Average Total Cost

Average cost per unit rises as output increases.

Signup and view all the flashcards

Profit Maximization for Competitive Firms

Competitive firms maximize profit by producing the quantity of output where price equals marginal cost (P = MC).

Signup and view all the flashcards

Marginal Revenue (MR)

The additional revenue generated by selling one more unit of a good.

Signup and view all the flashcards

Marginal Cost (MC)

The additional cost incurred by producing one more unit of a good.

Signup and view all the flashcards

When MR > MC

Producing more will add to profit.

Signup and view all the flashcards

When MR < MC

Producing less will add to profit.

Signup and view all the flashcards

Price-Taking Firm

A firm that accepts the market price for its product, as it has no influence on the price.

Signup and view all the flashcards

Profit-Maximizing Quantity

The quantity of output that maximizes the difference between total revenue and total cost.

Signup and view all the flashcards

Pitfalls of Profit Maximization

The rule P = MC may not hold if marginal revenue and marginal cost are not exactly equal.

Signup and view all the flashcards

Normal Profits

A firm earns normal profits when it covers all of its costs, including both variable and fixed costs, but does not generate any additional surplus or loss.

Signup and view all the flashcards

Variable Costs

Costs that change directly with the amount of output produced. Examples include raw materials and labor directly involved in production.

Signup and view all the flashcards

Fixed Costs

Costs that remain constant regardless of the level of output produced. Examples include rent, insurance, and salaries of fixed staff.

Signup and view all the flashcards

Shut-Down Price

The minimum price a firm needs to cover its variable costs. If the market price falls below this price, the firm will shut down operations in the short run.

Signup and view all the flashcards

Minimum ATC

The lowest point on the average total cost (ATC) curve, representing the lowest average cost at which a firm can produce a given level of output.

Signup and view all the flashcards

Supply Curve

A graphical representation showing the quantity of a good or service that producers are willing to supply at various prices.

Signup and view all the flashcards

Profitability Condition

The condition where a firm's price (P) is greater than its minimum average total cost (minimum ATC). This leads to a profitable situation.

Signup and view all the flashcards

Break-Even Price

The price at which a firm's total revenue equals its total cost, leading to zero profit.

Signup and view all the flashcards

Quantity Effect on Revenue

The increase in total revenue resulting from selling one more unit at its existing price.

Signup and view all the flashcards

Price Effect on Revenue

The decrease in total revenue caused by lowering the price of all units to sell one additional unit.

Signup and view all the flashcards

Monopolist's Marginal Revenue Curve

Always lies below the demand curve due to the price effect.

Signup and view all the flashcards

Why is MR below Demand?

Because to sell an additional unit, a monopolist must lower the market price on all units sold, decreasing total revenue.

Signup and view all the flashcards

Practice Question 1: MR Calculation

Calculating the marginal revenue when a monopolist sells 5 units at $5 and 6 units at $4.

Signup and view all the flashcards

Marginal Revenue and Profit Maximization

A monopolist maximizes profits by producing the quantity where marginal revenue equals marginal cost.

Signup and view all the flashcards

Demand Curve and Total Revenue

Total revenue increases as quantity increases, but at a decreasing rate due to the price effect.

Signup and view all the flashcards

Study Notes

Introduction to Economics

  • Economics is the study of how societies allocate scarce resources to satisfy unlimited wants.
  • Scarcity is a fundamental economic problem: Limited resources (land, labour, capital, entrepreneurship) cannot fulfill every human want.
  • Microeconomics examines the behavior of individual economic agents (consumers, firms) and markets.
  • Macroeconomics examines the overall performance of the economy as a whole.

Supply and Demand

  • Supply: The relationship between the price of a good and the quantity producers are willing to offer for sale.
  • Demand: The relationship between the price of a good and the quantity consumers are willing to purchase.
  • Supply and demand curves illustrate the interplay between buyers and sellers in a market.
  • Equilibrium price and quantity: The point where supply and demand curves intersect. At that point, the quantity demanded equals the quantity supplied.
  • Changes in supply and demand: Shifts in either curve cause changes in equilibrium price and quantity.
  • Factors that shift demand: Prices of related goods, income, tastes and preferences, expectations, number of buyers.
  • Factors that shift supply: Prices of inputs, technology, expected future prices, natural disasters, number of producers.

Production and Costs

  • Production function: The relationship between the inputs a firm uses and the output it produces.
  • Short-run: A period where at least one input is fixed.
  • Variable input: An input whose quantity can be changed.
  • Fixed input: An input whose quantity cannot be changed.
  • Long-run: A period where all inputs can be varied.
  • Total product: the total output from a given number of inputs.
  • Marginal product: The additional output generated by an additional unit of input.
  • Diminishing marginal returns: As more of a variable input is added, holding other inputs fixed, the marginal product eventually decreases.
  • Cost curves: Graphic representations of a firm's costs.
  • Fixed costs: Costs that do not vary with the quantity of output.
  • Variable costs: Costs that vary with the quantity of output.
  • Total cost: Fixed costs plus variable costs.
  • Marginal cost: The additional cost generated by producing one more unit of output.
  • Average total cost: Total cost divided by the quantity of output.

Firm Behavior and the Competitive Market

  • Perfectly competitive market: A market with many buyers and sellers, identical products, free entry and exit.
  • Marginal revenue (MR): The change in total revenue from selling one more unit.
  • Profit maximization: Firms produce where MR = MC (marginal revenue equals marginal cost) to maximize profits.
  • Shut-down price: The price below which production is unprofitable in the short-run.

Imperfect Competition

  • Monopoly: A market with a single seller of a unique product with no close substitutes.
  • Oligopoly: A market with a small number of firms producing similar or identical products; their decisions depend on each other's actions.
  • Monopolistic competition: Many firms, differentiated products, free entry and exit.
  • Barriers to entry: Conditions that make it difficult for firms to enter a market.
  • Increasing returns to scale (economies of scale): When average costs fall as output increases.
  • Price leadership: A strategy where one dominant firm sets the price, and other firms follow.
  • Collusion: When firms cooperate to raise profits.
  • Game theory: A set of analytical tools used to study strategic behavior where the players' decisions are interdependent.
  • Nash equilibrium: Each player's strategy is the best response to the expected strategies of other players.
  • Dominant strategy: A strategy that yields the highest payoff for a player regardless of the strategies chosen by other players.

Market Structure and Regulation

  • Governments use antitrust policies to limit the potentially anti-competitive behavior of firms in markets characterized by imperfect competition.
  • Price discrimination: Firms charge different prices to different customers for the same product.
  • Perfect price discrimination: Firms charge each customer the maximum price they are willing to pay.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Krugman Economics 6e Lecture Slides Ch 11 PDF

Description

Test your understanding of key concepts related to total revenue, profit equations, and marginal product in economics. This quiz will cover various scenarios involving worker productivity and cost analysis. Assess your knowledge on how these economic principles apply in real-world situations.

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser