Econ 105 Exam 3 NDSU
Number one priority for firms - Answer-Maximize profit
Total Cost - Answer-Total Variable Cost + Total Fixed Cost
Variable Cost - Answer-Costs of production that change with changes in the level of output
Fixed Cost - Answer-(Sunk Costs) Once they are incurred, there is nothing the firm can do to avoid them,
even if the firm shuts down
Average Cost - Answer-A per unit cost for given level of output
How to Calculate Average Fixed Cost - Answer-Total fixed cost/quantity
How to Calculate Average Variable Cost - Answer-Total variable cost/quantity
How to Calculate Average Total Cost - Answer-Total cost/quantity
Marginal Cost - Answer-The extra cost of adding one more unit of output
Marginal Cost - Answer-Change in total cost/change in quantity
, Demand Curve Facing the Firm - Answer-The amount of its own product it can sell at all alternative
prices, C.P. (At each price, what would the demand be?)
Industry Structures - Answer-Perfect competition, monopoly, monopolistic competition, oligopoly
Assumption 1 - Answer-Many Firms: each company has zero marker power
Price Takers - Answer-Accept price given by market, closest thing to exempt are farmers
Assumption 2 - Answer-Homogeneous Product: same product, different brands
Assumption 3 - Answer-Economic Agents are Rational: don't repeat mistakes
Assumption 4 - Answer-Economic Agents Have Perfect Mobility:
a.) Resources are free to move from firm to firm
b.) Anyone can get in or out of this market
Assumption 5 - Answer-No Artificial Constraints on Price: no price ceilings/price floors
***All internal market supply and demand
Because the DFF is horizontal at one price, - Answer-That means the TR will be a ray (straight line) out of
the origin
MR=AR=DFF=P
Elasticity - Answer-Designed to measure the responsiveness of a dependent variable to an independent
variable
Number one priority for firms - Answer-Maximize profit
Total Cost - Answer-Total Variable Cost + Total Fixed Cost
Variable Cost - Answer-Costs of production that change with changes in the level of output
Fixed Cost - Answer-(Sunk Costs) Once they are incurred, there is nothing the firm can do to avoid them,
even if the firm shuts down
Average Cost - Answer-A per unit cost for given level of output
How to Calculate Average Fixed Cost - Answer-Total fixed cost/quantity
How to Calculate Average Variable Cost - Answer-Total variable cost/quantity
How to Calculate Average Total Cost - Answer-Total cost/quantity
Marginal Cost - Answer-The extra cost of adding one more unit of output
Marginal Cost - Answer-Change in total cost/change in quantity
, Demand Curve Facing the Firm - Answer-The amount of its own product it can sell at all alternative
prices, C.P. (At each price, what would the demand be?)
Industry Structures - Answer-Perfect competition, monopoly, monopolistic competition, oligopoly
Assumption 1 - Answer-Many Firms: each company has zero marker power
Price Takers - Answer-Accept price given by market, closest thing to exempt are farmers
Assumption 2 - Answer-Homogeneous Product: same product, different brands
Assumption 3 - Answer-Economic Agents are Rational: don't repeat mistakes
Assumption 4 - Answer-Economic Agents Have Perfect Mobility:
a.) Resources are free to move from firm to firm
b.) Anyone can get in or out of this market
Assumption 5 - Answer-No Artificial Constraints on Price: no price ceilings/price floors
***All internal market supply and demand
Because the DFF is horizontal at one price, - Answer-That means the TR will be a ray (straight line) out of
the origin
MR=AR=DFF=P
Elasticity - Answer-Designed to measure the responsiveness of a dependent variable to an independent
variable
