Define the following terms and explain their importance to the study of economics.
a. marginal cost
b. marginal revenue
c. short-run equilibrium
d. supply curve of the firm
e. economic profit
What will be an ideal response?
a. Marginal cost is the cost to the firm of producing and selling an additional unit of the good.b. Marginal revenue is the amount of extra revenue the firm receives for producing and selling one more unit of a good.c. Short-run equilibrium occurs in the time period in which some commitments cannot be changed. The number of firms in the industry cannot be changed. The competitive firm will equate P to MC > AVC to choose profit-maximizing (or loss-minimizing) price and output. If price is below the minimum of AVC, the firm will minimize losses by shutting down.d. The short-run supply curve for the competitive firm is MC > AVC. If price is below the minimum of AVC, the firm will minimize losses by shutting down.e. Economic profit equals net earnings, in the accountant's sense, minus the opportunity cost of capital and of any other inputs supplied by the firm's owners. It is assumed that firms seek to maximize economic profits. In a competitive industry in the long run, economic profits are zero.
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If each player responds by imitating the action of his opponent in the previous round of a repeating game, the players are following a:
A. repeated cooperation agreement. B. collusion plan. C. commitment strategy. D. tit-for-tat strategy.
A country may gain a temporary comparative advantage if it:
A. remains self-sufficient until it stockpiles enough inventory to supply the world. B. is the first to discover and implement a new technology or production process. C. remains a political ally to all. D. All of these are true.
If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:
a. that for every 1% increase in quantity, there will be a 6% increase in price. b. that for every 1% increase in quantity, there will be a 6% decrease in price. c. that for every 6% increase in quantity, there will be a 1% increase in price. d. that for every 6% increase in quantity, there will be a 1% decrease in price.
Table 22.1Assume an apple farmer incurs the following costs and revenuesFertilizer$200Seeds$75Water$250Wages$750Property taxes$600Interest payments on borrowed funds$1,200Sales of apples$4,000Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the accounting profit is
A. -$1,000. B. $1,525. C. -$75. D. $925.