ECON 2100 EXAM 3 QUESTIONS AND ANSWERS
Total revenue (TR) - Answer -Amount a firm receives for the sale of its outputs
Total cost (TC) - Answer -Amount a firm pays to buy its outputs
Profit - Answer -Total revenue - total cost
Explicit costs - Answer -Opportunity costs that require the firm to pay
Implicit costs - Answer -Opportunity costs that don't require a cash outlay. Ex: lost
interest from money used to start business that could have been in the bank
Total cost of someone's business is the sum of _______ and _______ - Answer -
Explicit costs; implicit costs
Economic profit - Answer -Measured by economists. Total revenue - (explicit costs +
implicit costs)
Accounting profit - Answer -Measured by accountants. Total revenue - explicit costs.
Production function - Answer -The graph that shows the relationship between the
quantity of inputs (workers, machines, etc.) and quantity of outputs (products)
Marginal product - Answer -The increase in the quantity of output obtained from one
additional unit of that input
Diminishing marginal product - Answer -When marginal product decreases the more
the input increases
- Ex: when you add more workers in a bakery it gets crowded so the more you add, the
less the amount of cookies is gonna increase
- This also means the cost is increasing exponentially compared to the cookie increase
Fixed costs - Answer -Do not vary with the quantity of outputs produced. Ex: rent
Variable costs - Answer -Changes as the quantity of outputs produced changes. Ex:
workers' wages, $ spent on cookie dough
Total cost is the sum of _______ and ________ - Answer -Fixed costs; variable costs
Average total cost (ATC) - Answer -Cost of a typical unit produced. TC / Q
Average fixed cost (AFC) - Answer -Fixed cost / quantity of output (FC / Q)
Total revenue (TR) - Answer -Amount a firm receives for the sale of its outputs
Total cost (TC) - Answer -Amount a firm pays to buy its outputs
Profit - Answer -Total revenue - total cost
Explicit costs - Answer -Opportunity costs that require the firm to pay
Implicit costs - Answer -Opportunity costs that don't require a cash outlay. Ex: lost
interest from money used to start business that could have been in the bank
Total cost of someone's business is the sum of _______ and _______ - Answer -
Explicit costs; implicit costs
Economic profit - Answer -Measured by economists. Total revenue - (explicit costs +
implicit costs)
Accounting profit - Answer -Measured by accountants. Total revenue - explicit costs.
Production function - Answer -The graph that shows the relationship between the
quantity of inputs (workers, machines, etc.) and quantity of outputs (products)
Marginal product - Answer -The increase in the quantity of output obtained from one
additional unit of that input
Diminishing marginal product - Answer -When marginal product decreases the more
the input increases
- Ex: when you add more workers in a bakery it gets crowded so the more you add, the
less the amount of cookies is gonna increase
- This also means the cost is increasing exponentially compared to the cookie increase
Fixed costs - Answer -Do not vary with the quantity of outputs produced. Ex: rent
Variable costs - Answer -Changes as the quantity of outputs produced changes. Ex:
workers' wages, $ spent on cookie dough
Total cost is the sum of _______ and ________ - Answer -Fixed costs; variable costs
Average total cost (ATC) - Answer -Cost of a typical unit produced. TC / Q
Average fixed cost (AFC) - Answer -Fixed cost / quantity of output (FC / Q)
