ECON 208 midterm || WITH PASSED ANSWERS!!
technical efficiency correct answers when a given number of inputs are combined in such a
way as to maximize the level of output
cost minimization correct answers an implication of profit maximization that firms choose the
production method that produces any given level of output at the lowest possible cost
principle of substitution (in production) correct answers methods of production will change if
relative prices of inputs change, with relatively more of the cheaper input and relatively less
of the more expensive input being used
Long run average cost curve correct answers the curve showing the lowest possible cost of
producing each level of output when all inputs can be varied
economies of scale correct answers reduction of long-run average costs resulting from an
expansion in the scale of a firm's operations so that more of all inputs is being used
increasing returns (to scale) correct answers a situation in which output increases more than
in proportion to inputs as the scale of a firm's production increases. A firm in this situation is
a decreasing-cost firm
minimum efficient scale correct answers the smallest output at which LRAC reaches its
minimum. All available economies of scale have been realized at this point
constant returns correct answers a situation in which output increases in proportion to inputs
as the scale of production is increased. A firm in this situation is a constant-cost firm
decreasing returns correct answers a situation in which output increases less than in
proportion to inputs as the scale of a firm's production increases. A firm in this situation is an
increasing-cost firm
technological change correct answers any change in the available techniques of production;
one can produce the same amount with smaller amount of input (labour and capital)
productivity correct answers output produced per unit of some input; frequently used to refer
to labour productivity, measured by total output divided but the amount of labour used
single proprietorship correct answers a firm that has one owner who is personally responsible
for the firm's actions and debts
ordinary partnership correct answers a firm that has two or more joint owners, each of whom
is personally responsible for the firm's actions and debt
limited partnership correct answers a firm that has two classes of owners: general partners.
who take part in managing the firm and are personally liable for the firm's actions and debts,
and limited partners, who take no part in the management of the firm and risk only money
that they have invested
corporation correct answers a firm that has a legal existence separate from that of the owners
, state owned enterprise correct answers a firm that is owned by the government. In Canada,
these are called Crown Corporations
non profit organizations correct answers firms that provide goods and services with the
objective of just covering their costs. These are often called NGOs, for non-governmental
organizations
multinational corporations correct answers firms that have operations in more than one
country
equity correct answers financial capital that are funds provided by the owners of the firm
dividends correct answers the amount of money, normally a portion of the profits, a board of
directors distributes to the ordinary shareholders of the corporation. Suppose a company has
one million shares outstanding, and it decides to distribute 2 million dollars to its
shareholders. Then the dividend per share is $2 (2 million dollars divided by one million
shares).
debt correct answers financial capital that is funds borrowed from creditors outside the firm
bond correct answers a debt instrument carrying a specified amount, a schedule of interest
payments, and usually a date for redemption of it
intermediate products correct answers all outputs that are used as inputs by other producers in
a further stage of production
production function correct answers a functional relation showing the maximum output that
can be produced by any given combination of inputs
accounting profits correct answers revenues - explicit costs (costs that actually involve a
purchase of goods or services by the firm)
economic profits correct answers revenues - (explicit costs + implicit costs [items for which
there is no market transaction but for which there is still and opportunity cost for the firm])
economic profit correct answers the difference between the revenues received from the sale
of output and the opportunity cost of the inputs used to make the output. Negative economic
profits are called economic losses.
short run correct answers length of time over which some of the firm's factors of production
are fixed
fixed factor correct answers an input whose quantity cannot be changed in the short run (ex.
equipment)
variable factor correct answers an input whose quantity can be changed over the time period
under consideration
technical efficiency correct answers when a given number of inputs are combined in such a
way as to maximize the level of output
cost minimization correct answers an implication of profit maximization that firms choose the
production method that produces any given level of output at the lowest possible cost
principle of substitution (in production) correct answers methods of production will change if
relative prices of inputs change, with relatively more of the cheaper input and relatively less
of the more expensive input being used
Long run average cost curve correct answers the curve showing the lowest possible cost of
producing each level of output when all inputs can be varied
economies of scale correct answers reduction of long-run average costs resulting from an
expansion in the scale of a firm's operations so that more of all inputs is being used
increasing returns (to scale) correct answers a situation in which output increases more than
in proportion to inputs as the scale of a firm's production increases. A firm in this situation is
a decreasing-cost firm
minimum efficient scale correct answers the smallest output at which LRAC reaches its
minimum. All available economies of scale have been realized at this point
constant returns correct answers a situation in which output increases in proportion to inputs
as the scale of production is increased. A firm in this situation is a constant-cost firm
decreasing returns correct answers a situation in which output increases less than in
proportion to inputs as the scale of a firm's production increases. A firm in this situation is an
increasing-cost firm
technological change correct answers any change in the available techniques of production;
one can produce the same amount with smaller amount of input (labour and capital)
productivity correct answers output produced per unit of some input; frequently used to refer
to labour productivity, measured by total output divided but the amount of labour used
single proprietorship correct answers a firm that has one owner who is personally responsible
for the firm's actions and debts
ordinary partnership correct answers a firm that has two or more joint owners, each of whom
is personally responsible for the firm's actions and debt
limited partnership correct answers a firm that has two classes of owners: general partners.
who take part in managing the firm and are personally liable for the firm's actions and debts,
and limited partners, who take no part in the management of the firm and risk only money
that they have invested
corporation correct answers a firm that has a legal existence separate from that of the owners
, state owned enterprise correct answers a firm that is owned by the government. In Canada,
these are called Crown Corporations
non profit organizations correct answers firms that provide goods and services with the
objective of just covering their costs. These are often called NGOs, for non-governmental
organizations
multinational corporations correct answers firms that have operations in more than one
country
equity correct answers financial capital that are funds provided by the owners of the firm
dividends correct answers the amount of money, normally a portion of the profits, a board of
directors distributes to the ordinary shareholders of the corporation. Suppose a company has
one million shares outstanding, and it decides to distribute 2 million dollars to its
shareholders. Then the dividend per share is $2 (2 million dollars divided by one million
shares).
debt correct answers financial capital that is funds borrowed from creditors outside the firm
bond correct answers a debt instrument carrying a specified amount, a schedule of interest
payments, and usually a date for redemption of it
intermediate products correct answers all outputs that are used as inputs by other producers in
a further stage of production
production function correct answers a functional relation showing the maximum output that
can be produced by any given combination of inputs
accounting profits correct answers revenues - explicit costs (costs that actually involve a
purchase of goods or services by the firm)
economic profits correct answers revenues - (explicit costs + implicit costs [items for which
there is no market transaction but for which there is still and opportunity cost for the firm])
economic profit correct answers the difference between the revenues received from the sale
of output and the opportunity cost of the inputs used to make the output. Negative economic
profits are called economic losses.
short run correct answers length of time over which some of the firm's factors of production
are fixed
fixed factor correct answers an input whose quantity cannot be changed in the short run (ex.
equipment)
variable factor correct answers an input whose quantity can be changed over the time period
under consideration
