ECN 212 Exam #2 Review Questions
with Complete Solutions 2026-2027
Updated.
What is the formula to calculate profit? - Answer TOTAL REVENUE - TOTAL COST.
Explicit costs - Answer Input costs that require and outlay of money by the firm.
Implicit costs - Answer Input costs that doesn't require an outlay of money by the firm.
What is the formula to calculate total cost? - Answer EXPLICIT COSTS + IMPLICIT COSTS
What is the implicit costs for every business? - Answer The opportunity cost.
Production function - Answer Shows the relationship between the quantity of inputs used to
make the good and the quantity of outputs of the good.
Marginal product - Answer An increase in output that arises from an additional unit of input.
Total cost curve is between what? - Answer Total cost and quantity of output.
What happens to the cost curve and production function as production rises? - Answer - The
cost curve gets steeper
- The production function gets flatter
What is the formula for average total cost? - Answer TOTAL COST/QUANTITY
What is the formula to calculate average fixed cost? - Answer FIXED COST/QUANTITY
What is the formula to calculate average variable cost? - Answer VARIABLE COST/QUANTITY
What is the formula to calculate marginal cost? - Answer CHANGE IN TOTAL COST/CHANGE IN
QUANTITY
, What happens to the marginal cost when quantity of output increases? - Answer When
quantity of output increases then the marginal cost will also increase. It is upward sloping but
faces diminishing marginal product.
What happens to the AFC and AVC as quantity of output increases? - Answer - As quantity of
output increases AFC decreases due to FC
- As quantity of output increases AVC increases due to diminishing marginal product
Efficient scale - Answer The quantity of output used to minimize ATC which is at the bottom of
the u-shape.
What happens to ATC if you produce more or below the efficient scale? - Answer ATC will rise
above the minimum.
What happens to ATC when MC is greater or less than ATC? - Answer - MC < ATC then ATC is
falling
- MC > ATC then ATC is rising
where does MC curve cross? - Answer At ATC's minimun.
Economies of scale - Answer In the long run, the ATC will fall as the quantity of output
increases.
Diseconomies of scale - Answer In the long run, the ATC will rise as the quantity of output
increases.
What is the formula to calculate marginal product? - Answer CHANGE IN OUTPUT/CHANGE IN
WORKERS
Economic profit will never what? - Answer It will never exceed accounting profit.
How are costs and economic profit related? - Answer As costs go up, economic profit will go
down. As costs go down, economic profit will go up.
Competitive market - Answer A market which has many sellers and buyers trading identical
products so each buyer and seller are price takers.
Total revenue is proportional to what? - Answer The quantity of output.
with Complete Solutions 2026-2027
Updated.
What is the formula to calculate profit? - Answer TOTAL REVENUE - TOTAL COST.
Explicit costs - Answer Input costs that require and outlay of money by the firm.
Implicit costs - Answer Input costs that doesn't require an outlay of money by the firm.
What is the formula to calculate total cost? - Answer EXPLICIT COSTS + IMPLICIT COSTS
What is the implicit costs for every business? - Answer The opportunity cost.
Production function - Answer Shows the relationship between the quantity of inputs used to
make the good and the quantity of outputs of the good.
Marginal product - Answer An increase in output that arises from an additional unit of input.
Total cost curve is between what? - Answer Total cost and quantity of output.
What happens to the cost curve and production function as production rises? - Answer - The
cost curve gets steeper
- The production function gets flatter
What is the formula for average total cost? - Answer TOTAL COST/QUANTITY
What is the formula to calculate average fixed cost? - Answer FIXED COST/QUANTITY
What is the formula to calculate average variable cost? - Answer VARIABLE COST/QUANTITY
What is the formula to calculate marginal cost? - Answer CHANGE IN TOTAL COST/CHANGE IN
QUANTITY
, What happens to the marginal cost when quantity of output increases? - Answer When
quantity of output increases then the marginal cost will also increase. It is upward sloping but
faces diminishing marginal product.
What happens to the AFC and AVC as quantity of output increases? - Answer - As quantity of
output increases AFC decreases due to FC
- As quantity of output increases AVC increases due to diminishing marginal product
Efficient scale - Answer The quantity of output used to minimize ATC which is at the bottom of
the u-shape.
What happens to ATC if you produce more or below the efficient scale? - Answer ATC will rise
above the minimum.
What happens to ATC when MC is greater or less than ATC? - Answer - MC < ATC then ATC is
falling
- MC > ATC then ATC is rising
where does MC curve cross? - Answer At ATC's minimun.
Economies of scale - Answer In the long run, the ATC will fall as the quantity of output
increases.
Diseconomies of scale - Answer In the long run, the ATC will rise as the quantity of output
increases.
What is the formula to calculate marginal product? - Answer CHANGE IN OUTPUT/CHANGE IN
WORKERS
Economic profit will never what? - Answer It will never exceed accounting profit.
How are costs and economic profit related? - Answer As costs go up, economic profit will go
down. As costs go down, economic profit will go up.
Competitive market - Answer A market which has many sellers and buyers trading identical
products so each buyer and seller are price takers.
Total revenue is proportional to what? - Answer The quantity of output.
