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25 terms

micro test 2

opportunity cost
the foregone income that the owner could have made by spending time working on another job
ex of a short run decision
automobile manufacturing company is trying to decide whether or not to expand its existing workforce
rachel left her business where she earned 42000 to create a new one, her total costs of new business are
both the expenses incurred for office space, equipment, and supplies and her foregone salary of $42,000 per
a firm temporarily shuts down for a week
total costs equal total fixed cost
fixed costs exist only in the
short run when some inputs are fixed
in a perfectly competitive market the demand curve faced by an individual firm is
perfectly elastic
a perfectly competitive firms marginal revenue is
equal to the selling price
if marginal revenue of the last widget a firm produces is $50 and its marginal cost is $35 a firm should..
increase production
existence of economic losses induces firms to
exit an industry, which shifts the market supply curve to the left and increases market price
if demand shifts right and price/marginal revenue is above the marginal cost than
the firm is earning positive economic profit in the short run
five assumptions of the perfectly competitive market
max profits
homogenous products
easy exit/entry into the market
equal access to resources
many firms
maximize profits
firms want to produce at the max output level where marginal revenue equals marginal cost
many firms
firms are price takers and each individual firm cannot control the market price
homogenous products
all firms have identical products, are perfect constitutes of each other and have perfectly elastic demand
can accounting profit be positive while economic profits are negative
yes if total revenue covers expenditures, but not opportunity costs
average product =
a firm produces 30k vases w/ a cost of 180k, while producing 40k costs 200k, this could explain the theory of
economies of scale
economies of scale
cost advantages that a business obtains due to expansion
ex of diseconomies of scale
the xyz co. increased production capacity by 25 percent and experienced a 30 percent increase in its total cost
the upward sloping portion of the short run total average cost curve is caused by
the presence of fixed inputs
long run average cost at any output level
always be less than or equal to short run average total costs
in a perfectly competitive market the demand curve faced by an individual firm is
perfectly elastic
demand curve for a perfect competitor is equal to its
marginal revenue curve
long run competitive equilibrium in an industry implies that no firm
has an incentive to enter or exit the market
an improvement in technology of producing tv's and the production is a competitive industry. assuming they were in equilibrium the long run effect on the improvement is
lower tv prices and higher production