P.C. is for Me
Describe 2 defining characteristics of the perfectly competitive market.
IDENTICAL PRODUCT, LOTS of buyers and sellers, ease of entry and exit, price taker, etc.
What are the axes (X and Y) on the production function?
X axis is inputs (such as labor) and Y axis is output (such as widgets)
The difference between Total Revenue and Total Cost is referred to as:
Profit (or Loss if it's negative)
Who's MR. MC? Name the Acronyms and explain what the point of it is.
Marginal Revenue = Marginal Cost is the profit maximizing quantity.
You have at least ONE fixed cost that you can't get out of.
Name the author of our Summer Reading. (FIRST AND LAST NAME)
Charles Wheelan
Marginal Revenue = Demand = Average Revenue = Price (this is the acronym that refers to the PC firm's demand curve).
The property whereby when additional variable inputs are added, the additional output added decreases.
Define variable cost and give an example.
A variable cost is one that increases as output increases (examples would include wages, materials, etc.)
When will the firm "shut down". Explain using price and other cost measures.
If Price falls below min. AVC the firm will shutdown. (P<AVC, TR<TVC)
When LR-ATC is rising, this is referred to as:
Diseconomies of Scale
What do economists call it when there is a cost imposed on a bystander who is neither a buyer or a seller in a transaction. Give the term.
Negative Externality
P = MC (Price = Marginal Cost)
This value gets closer and closer to ATC as output increases. Name it.
Average Variable Cost
Another name for zero economic profit is ______ profit.
NORMAL
How should the P.C. firm change its actions (decisions) if MARKET PRICE increases?
It should INCREASE its production quantity.
State the "Exit" point for in terms of market price.
Firms exit when Price < ATC
Who is the current C.E.O. of Berkshire Hathaway? (First and Last Name)
Warren Buffet
What does the term EFFICIENT SCALE mean? Explain in terms of production costs.
The EFFICIENT SCALE refers to when the firm is operating at its MINIMUM ATC (average total cost)
What is the CALCULATION for MARGINAL COST?
Determine the CHANGE in TOTAL COST relative to the CHANGE IN OUTPUT (marginal product)
Explain the difference between "economies of scale" and "increasing returns to scale"
Economies refers to the relationship between scale and $cost measures; whereas increasing returns refers to the input/output relationship (double plant size and quadruple output)
A PC firm is producing where MC > MR, what SPECIFIC change should they make to improve their current decisions?
They should REDUCE QUANTITY to get to their MR = MC point.
How do you know when the P.C. market is in a Long-Run Equilibrium
Price = min. ATC (at MR=MC); operating at productive efficiency
Name the 2-word term used for when an insider informs the press or government about unethical practices at an organization.
Whistle blowing
EXPLAIN: a) what productive efficient means, and b) the PROCESS whereby the P.C. market accomplishes this in the LR.
Explain how and why the SHORT RUN ATC is U-SHAPED. Specifically, what causes it to fall and then later rise?
Falls due to spreading of FC over increased output; MC rises due to D.M.P., this brings up AVC, which brings up ATC.
Explain WHICH is larger and WHY - accounting profit or economic profit; use the terms EXPLICIT and IMPLICIT costs in your answer.
ACCOUNTING profit is larger because it deducts only EXPLICIT costs, whereas economic profit deducts BOTH explicit AND IMPLICIT (O.C.) costs.
It is the PC firm's MC curve above MIN. AVC.
Explain the U-SHAPE for the LONG-RUN ATC. (Different from explanation for SR-ATC). Explain the falling portion and the rising portion.
LRATC falls due to specialization of plant as you increase SCALE and LRATC rises as the size gets so large that there is duplication of effort/bureaucracy/mismangement/miscommunication.
George Akerlof's analysis of information asymmetry was entitled: The Market for ____________ "
Lemons