ECON 1050 Chapter Notes - Chapter 10: Sole Proprietorship, Job Performance, Retained Earnings

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bluelion986

5 Dec 2017

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Econ chapter 10 notes and terms organizing production. Economic profit is equal to the total revenue minus total cost, with total cost measured as the opportunity cost of production. Accounting profit is the money profit that a company makes. The opportunity cost of production is the value of the best alternative use of the resources that a firm uses in production. Normal profit: the profit an entrepreneur makes on average, the cost o entrepreneurship and is an o. c to production: labor the owner of a firm may also supply labor, but not take a wage. The o. c of the owner"s labor is the wage income forgone by not taking the best alternative job. In these decisions, a firm"s actions are limited by the constraints that it faces. Technological efficiency: occurs when a firm produces a given output by using the least amount of inputs. There are two systems which can organize the production of goods/services:

Related Questions

6. Given that resources are scarce:

A. A "free lunch" is possible, but only for a limited number of people.

B. Poor countries must make choices, but rich countries do not have to make choices.

C. Opportunity costs are experienced whenever choices are made.

D. Some choices involve opportunity costs while other choices do not

7. The opportunity cost of playing tennis with your friend is:

A. Negative since its good exercise

B. Zero since you already own the tennis racket and play on a public court

C. The next-best alternative use of your time that is forgone.

D. The cost of the tennis lessons you took last year.

8. The concept of opportunity cost would become irrelevant if:

A. The market mechanism functioned to allocate resources.

B. The government allocated resources.

C. The production possibilities curve bowed outward.

D. Resources were no longer scarce.

9. If resources are limited:

A. People will rush to buy more goods than they would otherwise.

B. Businesses will sell more products than they would otherwise.

C. Choices that involve tradeoffs must be made.

D. All individuals are deprived of basic necessities.

10. Which of the following is true about the factors of production?

A. The factors of production as well as technology determine the physical limits to production

B. Rich countries have an unlimited quantity of factors.

C. The factors include natural resources but not skilled labor.

D. Some factors are scarce but other factors are not.

amethystraven1

True/False

Indicate whether the sentence or statement is true or false.

____ 1. The average fixed cost curve increases as output increases over a relevant range of production.

____ 2. Average revenue is slightly higher than price.

____ 3. Marginal cost curves and average cost curves are both purely upward sloping.

____ 4. A firm that sells at a price below average cost is not making a normal profit.

____ 5. In the short run, it is possible for a perfectly competitive firm to make economic profits or economic losses.

____ 6. If a firm sells its output at a price greater than AC, it will earn economic profit.

____ 7. Zero profit in the economic sense means that firms are earning a normal rate of return.

____ 8. In a free market (laissez-faire) system, the price mechanism dictates the production planning (how to produce) decisions.

____ 9. Free markets produce relatively high levels of efficiency but low rates of growth.

____ 10. A natural monopoly occurs when a single firm can produce the entire output of the market at a lower average cost than could many firms.

bronzemoose966

Suppose we have a duopoly in the production of mineral spring water. Each firm has the same cost structure where MC(Q) = 10. The market demand for mineral spring water is given by P = 70 - Q/50
Each firm, wishing to maximize profits, assumes that the other firm will not change its current level of production. What will be the final level of production for the market (after a Cournot equilibrium is reached)? How much is produced by each firm? How much profit is earned by each firm?

Suppose the two firms in the question above collude to maximize joint profits. What would the equilibrium price and quantity be? How much profit is made in the industry and by each firm?

carminewasp285

ECON 1050 Chapter Notes - Chapter 10: Sole Proprietorship, Job Performance, Retained Earnings

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