Typical Firms
In a typical firm, demand is equal to what three things
Marginal Revenue, Average Revenue and Price
(*think MR. dARP)
The optimal output quantity produced is found where the marginal revenue curve intersects what curve
marginal cost curve
Costs that refer to the opportunity cost of resources that are owned are known as what kind of costs
implicit costs
A market structure in which there are only a few firms and differentiation between products is done mostly through branding
Oligopoly
What is total revenue if 8 bales of hay are sold at five dollars each?
$40
TR = P x Q
In a typical firm, demand is perfectly _______
elastic
The space between average total cost and average variable cost at a certain quantity is equivalent to that quantity's _______ ______
fixed cost
Explicit costs are also known as what kind of costs
accounting costs
Gives the creator of a literary or artistic work the sole right to profit from that work
Copyright
If variable costs increase by $21 and quantity increases by 3, what is the marginal cost
$7
MC = change in VC/change in Q
OR
MC = change in TC/change in Q
For a firm to make a profit, its price has to be above what
Average Total Cost
At the first unit of production, marginal cost is the same as what
average variable cost
If you subtract the explicit costs from total revenue, you will be left with the __________ _______
accounting profit
A market structure in which there are many competing firms in an industry, each one sells a differentiated product and there is free entry unto and exit from the industry in the long run
Monopolistic Competition
If total revenue is $100, explicit costs are 45$ and implicit costs are $10, what is the accounting profit?
$55
Accounting profit = TR - Accounting Costs
AKA
Accounting profit = TR - Explicit Cots
All typical firms in a competitive marker sell this kind of good
Standardized good --- AKA commodity
The slope of the variable cost curve is the same as the slope of what curve
The Total Cost curve
In the short run, firms should shut down if price falls below what
minimum average variable cost
When long-run average total cost declines as output increases
Calculate profit if quantity is 5, price is 10 and ATC is 5
$25
Q(P-ATC)
In a perfectly competitive market, all individual firms are known as what
Price-takers
What curve intersects the marginal product curve at its own maximum
In the short run, fixed costs are considered what kind of costs
sunk costs
The square of each firm's share of marker sales summed over the industry
Herfindahl-Hirschman Index
Quiz Example: what is the ECONOMIC PROFIT made
Entrepreneur's potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
$94,000
(380,000 - (50,000+22,000+120,000+8,000+80,000+6,000))