Podcast
Questions and Answers
What is the economic process of converting inputs into outputs called?
What is the economic process of converting inputs into outputs called?
Production function
What is the law that states that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output?
What is the law that states that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output?
Law of diminishing marginal return
What is the cost of all variable inputs called?
What is the cost of all variable inputs called?
Total variable cost
What is the cost of all fixed inputs called?
What is the cost of all fixed inputs called?
Signup and view all the answers
What is the sum of TVC and TFC called?
What is the sum of TVC and TFC called?
Signup and view all the answers
What is the variable cost per product, or total variable cost divided by output called?
What is the variable cost per product, or total variable cost divided by output called?
Signup and view all the answers
What is the fixed cost per product, or total fixed cost divided by output called?
What is the fixed cost per product, or total fixed cost divided by output called?
Signup and view all the answers
What is the cost per product, or total cost divided by output called?
What is the cost per product, or total cost divided by output called?
Signup and view all the answers
What is the per product cost of producing an additional unit of the product, or the change in total cost divided by the change in output called?
What is the per product cost of producing an additional unit of the product, or the change in total cost divided by the change in output called?
Signup and view all the answers
What is the ratio that compares the size of firms in relation to their industry as a whole called?
What is the ratio that compares the size of firms in relation to their industry as a whole called?
Signup and view all the answers
What is a market structure in which there are many competing firms selling identical products or services called?
What is a market structure in which there are many competing firms selling identical products or services called?
Signup and view all the answers
In a perfectly competitive market, firms are price setters.
In a perfectly competitive market, firms are price setters.
Signup and view all the answers
What is a market structure in which there is only one seller called?
What is a market structure in which there is only one seller called?
Signup and view all the answers
What is a market situation in which there is only one buyer called?
What is a market situation in which there is only one buyer called?
Signup and view all the answers
What is a state of the market in which only a small number of buyers exists for a product called?
What is a state of the market in which only a small number of buyers exists for a product called?
Signup and view all the answers
What is a market structure in which there are many small firms selling slightly differentiated products or services called?
What is a market structure in which there are many small firms selling slightly differentiated products or services called?
Signup and view all the answers
What is an industry with only one seller called? This product that the firm sells has no close substitutes.
What is an industry with only one seller called? This product that the firm sells has no close substitutes.
Signup and view all the answers
What type of monopoly is often found in industries with high fixed costs, such as electricity and water supply?
What type of monopoly is often found in industries with high fixed costs, such as electricity and water supply?
Signup and view all the answers
What type of monopoly occurs when a single firm controls the market within a specific geographic region, such as a small-town grocery store or a remote gas station?
What type of monopoly occurs when a single firm controls the market within a specific geographic region, such as a small-town grocery store or a remote gas station?
Signup and view all the answers
What type of monopoly arises when a firm controls a specific production process or technology that others cannot replicate or access, often due to patents and intellectual property rights?
What type of monopoly arises when a firm controls a specific production process or technology that others cannot replicate or access, often due to patents and intellectual property rights?
Signup and view all the answers
What type of monopoly where the government grants exclusive rights to a single firm through licenses, patents, or regulations?
What type of monopoly where the government grants exclusive rights to a single firm through licenses, patents, or regulations?
Signup and view all the answers
What is a market dominated by a single buyer called?
What is a market dominated by a single buyer called?
Signup and view all the answers
What are out-of-pocket costs, or payments that are actually made, called?
What are out-of-pocket costs, or payments that are actually made, called?
Signup and view all the answers
What are the opportunity costs of using resources already owned by a firm called?
What are the opportunity costs of using resources already owned by a firm called?
Signup and view all the answers
What is total revenue minus total cost called?
What is total revenue minus total cost called?
Signup and view all the answers
What is a market where sellers have little negotiation power and compete to sell their goods and services to a handful of buyers called?
What is a market where sellers have little negotiation power and compete to sell their goods and services to a handful of buyers called?
Signup and view all the answers
What are the costs that change with the level of production output called?
What are the costs that change with the level of production output called?
Signup and view all the answers
What are the costs that remain constant regardless of the level of production output called?
What are the costs that remain constant regardless of the level of production output called?
Signup and view all the answers
What is the process of transforming raw materials, labor, and capital into finished goods or services called?
What is the process of transforming raw materials, labor, and capital into finished goods or services called?
Signup and view all the answers
What law explains that as you add more of one input to a production process while keeping other inputs constant, the increase in output will eventually decline?
What law explains that as you add more of one input to a production process while keeping other inputs constant, the increase in output will eventually decline?
Signup and view all the answers
What is the cost of all the inputs used in production called?
What is the cost of all the inputs used in production called?
Signup and view all the answers
What is the cost of producing one additional unit of output called?
What is the cost of producing one additional unit of output called?
Signup and view all the answers
What is the average cost of producing one unit of output called?
What is the average cost of producing one unit of output called?
Signup and view all the answers
What is the ratio that compares the size of firms in relation to their entire industry called?
What is the ratio that compares the size of firms in relation to their entire industry called?
Signup and view all the answers
What type of market structure is characterized by many firms selling identical products, where firms are price takers and there is free entry and exit?
What type of market structure is characterized by many firms selling identical products, where firms are price takers and there is free entry and exit?
Signup and view all the answers
What type of market structure is characterized by a single firm controlling the entire supply of a good or service?
What type of market structure is characterized by a single firm controlling the entire supply of a good or service?
Signup and view all the answers
What is a market structure with a single buyer called?
What is a market structure with a single buyer called?
Signup and view all the answers
What type of market structure is characterized by a small number of firms, each with a significant share of the market?
What type of market structure is characterized by a small number of firms, each with a significant share of the market?
Signup and view all the answers
What type of market structure has many firms, but they sell differentiated products? There are barriers to entry, but the firm's have some degree of market power.
What type of market structure has many firms, but they sell differentiated products? There are barriers to entry, but the firm's have some degree of market power.
Signup and view all the answers
What are the costs that are directly measurable and represent actual expenses incurred by a business called?
What are the costs that are directly measurable and represent actual expenses incurred by a business called?
Signup and view all the answers
What are the costs that represent the value of forgone opportunities when making a decision called?
What are the costs that represent the value of forgone opportunities when making a decision called?
Signup and view all the answers
What is the difference between total revenue and total costs called?
What is the difference between total revenue and total costs called?
Signup and view all the answers
What is the situation where a few powerful buyers have a significant effect on the purchase price of goods and services from a large number of sellers called?
What is the situation where a few powerful buyers have a significant effect on the purchase price of goods and services from a large number of sellers called?
Signup and view all the answers
What is the difference between the money brought in and the money paid out called?
What is the difference between the money brought in and the money paid out called?
Signup and view all the answers
What is the advantage that drives consumption prices down called?
What is the advantage that drives consumption prices down called?
Signup and view all the answers
What is the advantage that one seller can bring the price UP called?
What is the advantage that one seller can bring the price UP called?
Signup and view all the answers
What is the advantage that one buyer can cause a PRICE CUT called?
What is the advantage that one buyer can cause a PRICE CUT called?
Signup and view all the answers
Study Notes
Production Function
- Explains how businesses convert inputs (labor, raw materials, capital) into outputs (products/services).
- Determines the quantity of each input a firm uses to produce a given amount of output.
- Shows how firms decide output quantities based on demand.
- Focuses on a business's production activities, deciding how to produce output given plant size and equipment.
- Short-run cost minimization involves choosing variable inputs to minimize total costs, given fixed input quantities.
- Short-run profit maximization occurs when marginal revenue equals marginal cost.
- Long-run profit maximization involves adjusting all inputs to maximize long-term profits, considering factors like technology and shifts in demand/prices.
Law of Diminishing Marginal Returns
- Also known as the law of diminishing returns, the law of variable proportions, or diminishing marginal productivity.
- States that after a certain point, adding more of one input (e.g., labor) while keeping other inputs constant will cause progressively smaller increases in output.
- This principle shows that increasing one input at a time will ultimately lead to decreasing returns (per-unit productivity decreases).
Three Stages of Production
- Increasing returns stage: Output increases as more units of input are added.
- Diminishing returns stage: Output increases at a decreasing rate as more units of input are added.
- Negative returns stage: Output decreases as more units of input are added beyond a certain point.
- Understanding these stages is crucial for optimizing production processes.
Total Variable Costs
- Costs of all variable inputs (e.g., materials, labor).
Total Fixed Costs
- Costs of all fixed inputs (e.g., rent, machinery).
Total Costs
- Sum of total variable costs and total fixed costs.
Average Variable Cost
- Variable cost per unit of output (Total Variable Cost / Output).
Average Fixed Cost
- Fixed cost per unit of output (Total Fixed Cost / Output).
Average Total Cost
- Total cost per unit of output (Total Cost / Output).
Marginal Cost
- Cost of producing an additional unit of output (Change in Total Cost / Change in Output).
Market Structure
- Classifies markets based on the degree and nature of competition.
- Describes how firms differentiate their products.
- Helps understand market differences.
Perfect Competition
- Large number of buyers and sellers.
- Identical (homogeneous) products.
- All sellers sell at a uniform price (price takers).
- Free entry and exit of firms.
- Firms are small compared to the overall market. High competition prevents price increases.
Monopoly
- One seller.
- No close substitutes for the product.
- Monopolist is a price maker.
- Significant barriers to entry/exit.
- Firm's demand curve is the market demand curve.
Monopolistic Competition
- Many small firms.
- Slightly differentiated products or services.
- Firms compete based on product differences.
- Relatively low barriers to entry/exit.
Oligopoly
- Few large firms dominate the market.
- Products may be differentiated or homogeneous.
- Actions of one firm significantly impact other firms (interdependence).
Monopsony
- One buyer in the market.
- Similar to monopoly but on the buyer's side.
- Buyer is a price maker.
- Significant barriers to entry/exit for new buyers.
Oligopsony
- A small number of buyers in a market.
- Similar to oligopoly but on the buyer's side.
- Buyers collectively influence prices of a product.
Explicit Costs
- Out-of-pocket payments.
Implicit Costs
- Opportunity costs of resources already owned by a firm.
Accounting Profit
- Total revenue minus explicit costs.
Economic Profit
- Total revenue minus total costs (including both explicit and implicit costs).
Types of Monopolies
- Natural, Geographical, Technological, Legal.
Demand, Product Varieties, Quantity of Products, Delivery Schedule, Payment Mode
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz explores the concepts of production function and the law of diminishing marginal returns. It covers how businesses convert inputs into outputs, the decision-making process for output quantities, and factors that influence cost and profit maximization. Dive into the principles that govern production activities and input management in the short and long run!
