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EC120 Lecture Notes - Lecture 13: Average Cost, Marginal Cost, Marginal Product

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11 Nov 2017

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Hideki Ariizumi

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EC120 Full Course Notes

EC120 Full Course Notes

Document Summary

Microeconomics chapter 13 the costs of production. Economic profit vs. accounting profit make a good and the quantity of output of that good output firm. Total revenue (for a firm) the amount a firm receive for the sale of its. Total cost the market value of the inputs a firm uses in production. Profit total revenue minus total cost. Explicit costs input costs that require an outlay of money by the firm. Implicit costs input costs that do not require an outlay of money by the. Economic profit total revenue minus total cost, including both explicit and. Accounting profit total revenue minus total explicit cost. Production function the relationship between quantity of inputs used to. Marginal product the increase in output that arises from an additional unit. Diminishing marginal product the property whereby the marginal product. Fixed costs costs that do not vary with the quantity of output produced.

Related Questions

For a firm, the production function represents the relationship between
A. quantity of inputs and total cost
B. quantity of inputs and quantity of output
C. quantity of output and total cost
D. implicit costs and explicit costs

5. Economic profit is equal to

a. total revenue minus the explicit cost of producing goods and services.

b. total revenue minus the opportunity cost of producing goods and services.

c. total revenue minus the accounting cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

6. Accounting profit is equal to

a. marginal revenue minus marginal cost.

b. total revenue minus the explicit cost of producing goods and services.

c. total revenue minus the opportunity cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

7. Economic profit

a. will never exceed the accounting profit.

b. is most often equal to accounting profit

c. is always at least as large as accounting profit.

d. is a less complete measure of profitability than accounting profit

8. Which of the following expressions is correct?

a. accounting profit = total revenue - explicit costs

b. economic profit = total revenue - implicit costs

c. economic profit = total revenue - explicit costs

d. Both a and b are correct

Scenario 13-2:

Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3% interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50. Also during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000.

9. Zach's accounting profit for the year was

10. Zach's economic profit for the year was

Scenario 14-1:

As part of an estate settlement, Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per

11. At the end of the first year of operating her new business, Mary's accountant reported an accounting profit of $150,000. What was Mary's economic profit?

a. $25,000 loss

c. $25,000 profit

d. $150,000 profit

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

all of the time
some of the time
on rare occasions
none of the time

2. Economics Profit is:

the same as accounting profit
sales minus explicit costs and implicit costs
sales minus variable costs and fixed costs
opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

monopoly
oligopoly
perfect competition
monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

identical products
perfect mobility
perfect knowledge
price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

true
false

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