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125 Terms

1
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What is a companies revenue?

revenue is the total amount a company makes

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Price x Quantity= revenue

3
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What is a companies profit?

the amount of money a company makes after they paid their expenses

4
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Revenue-costs=

5
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What is the difference between accountants and economists?

accountant look at only Explicit costs, where as economists look at both explicit and implicit costs

6
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describe explicit costs

explicit costs (aka out of pocket costs) are payments that are made for using the resources of others. For example an explicit cost for a company may be their rent or how much it costs them to buy their materials.

7
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describe implicit costs

implicit costs are the opportunity costs firms "pay" for using their own resources. For example time, forgone rent, and forgone wages.

8
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total revenue (TR)-economic costs (explicit and implicit)= ______________________

economic profit

9
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total revenue (TR)-accounting costs (explicit only)= ______________________

accounting profit

10
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if a company is making no economic profit then....

the company is making a normal profit

11
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What is normal profit?

normal profit is what a firm makes when they sell the exact same product as another firm. The firm will break even (hit equilibrium) and make no economic profit. (This is in a efficient competitive market )

12
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What is the main goal of every business?

to maximize profit!!!

13
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MR=MC

14
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To earn profit, firms must make _____________

outputs

15
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___________ are the resources needed to make outputs. They are also called factors

inputs

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______ ______ is the total output or quantity produced.

17
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This total number that a product is produced. (set number)

18
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For example the ____ ____ of varsity lancer dancer jackets is 20.

TP (total product)

19
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_____ ____ the additional number of outputs (products) generated by additional works (inputs)

MP (marginal product)

20
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Marginal Product (MP)= change in _____ _____ /change in ________ (workers)

change in TP/ change in inputs

21
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What does a MP curve look like?

22
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What is Average Product? (AP)

the number of products (outputs) per unit of inputs (workers)

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AP= ______ ______/units of labor (# if inputs or workers)

TP/ units of labor

24
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What are fixed resources? provide an example

fixed resources are resources that do not change with the number of products produced.

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For example: in a pizza restaurant, a fixed resource would be the pizza oven

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What are variable resources? provide an example

variable resources are resources that change with the number of products produced.

27
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For example: in a pizza restaurant, a variable resource would be the cheese. The more pizzas you make, you more cheese you will need.

28
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What happens to MP (amount producing) as you add more workers?

once you hit a certain number of workers, you can only make so many output. This explains the law of diminishing marginal returns.

29
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explain the law of diminishing marginal (additional) returns

as variable resources (workers) are added to fixed resources (machines) the additional output (# made) produced from each additional worker will eventually fall.

30
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Example: on thanksgiving, there are eventually people in the kitchen so you cannot get anything accomplished

31
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a company is in the ___________ run if they have at least 1 fixed resource.

short

32
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a company is in the _________ run if all of their resources are variable (changing). This describes what can happen in the future

long

33
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the M&M factory only as so many machines (fixed resources) so they can only make so many M&Ms. This puts them in the _____________.

short run

34
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Once the M&M factory opens a new factory, they can make more M&Ms with more machines (fixed resources). This puts them in the _____________.

long run

35
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What are fixed costs?

the cost of a fixed resources that doesn't change with the amount produced

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Average fixed costs= ______ ______/ quantity

FC (fixed costs)

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what are variable costs?

costs for variable resources (changing) that do change as the amount produced changes

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Average variable costs= _____ ____/ quantity

VC (variable costs)

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what is the total cost?

the sum of fixed and variable costs

40
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Average total costs= _____ ____/ quantity

TC (total costs)

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what are marginal costs?

the additional costs of 1 additional output (the production of 2 more workers equals more output)

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marginal costs= change in ____ ____/ quantiy

TC

43
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Average Total Costs (ATC)- Average Variable Costs= _________________

AFC

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T or F

45
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MC and MP curves are mirror images of eachother

T

46
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where does MC intersect ATC?

at ATC's lowest point

47
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if a FIXED cost changes, only ___________ and __________ shifts

ATC and AVC (MC and AVC do not change)

48
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if a VARIABLE cost changes, only __________, ___________, and ___________ change.

TC, MC and ATC

49
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What is the long run used for?

the long run is used for planning. Firms use the long run to identify the results of something in the future.

50
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what occurs when the long run average cost falls?

a mass production technique is used to change what is happening in the long run

51
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on a cost curves graph... diseconomies is

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a) increasing

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b)decreasing

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c)constant

A

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increasing-as the firm gets too big and difficult to manage

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on a cost curves graph... constant returns to scale is

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a)increasing

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b)decreasing

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c)constant

C

60
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constant- the long run ATC is as low as it can get

61
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on a cost curves graph... economies to scale is

62
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a) increasing

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b) decreasing

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c)constant

B

65
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decreasing

66
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Name the four market structures

perfect competition, monopolistic competition, oligopoly, and monopoly

67
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What type of market structure?

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-many small firms

69
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-identical products

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-low barriers-easy to enter

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-no advertisment

perfect competition

72
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provide an example of perfect competition

a farmers market

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what type of market structure?

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-one large firm (firm is THE market)

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-unique product (no close substitutes)

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-high barriers

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-price makers

monopoly

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provide an example of monopoly

KC P&L

79
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what type of market structure?

80
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-few large producers (less than 10)

81
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-identical or very similar products

82
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-high barriers

83
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-price makers

oligopoly

84
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provide an example of oligopoly

cell phone service (At&T and Verizon)

85
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what type of market structure?

86
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-relatively large number of firms

87
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-different products, but similar

88
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-some control over price

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-low barriers

90
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  • a lot of advertising

monopolistic competition

91
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provide an example of monopolistic competition

fast food restaurants

92
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List three types of barriers...

  1. geography or ownership of raw materials

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  1. the government creates patents

94
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  1. superior technology

95
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the idea that firms must worry about the decisions of their competitors and use that strategy is known as...

mutual independence

96
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why are perfectly competitive firms price takers?

because if a firm charges more than the market price (equilibrium), no one will buy.

97
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T or F

98
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Quantity should be produced where MRDARP crosses MC

T

99
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to find your total revenue, multiply the quantity that should be produced times ____________

MR. DARP

100
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A firm should continue to produce as long as MR.DARP is above ___________

AVC