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The utility of a consumer is a measure of the satisfaction the consumer derives from consumption of goods and services” (p. 270) 39) What is the Law of Diminishing Marginal Utility? “According to the principle of diminishing marginal utility, each successive unit of a good or service consumed adds less to total utility than the previous unit. ” (p. 272) In other words the more one consumes the more they will be satisfied until they reach a point where consuming add nothing to their satisfaction. 40) What is optimal consumption combination?
A consumption bundle “is the collection of all goods and services consumed by that individual” (p. 270). The optimal consumption combination is “the consumption bundle that maximizes the consumer’s total utility given his or her budget constraint. ” (p. 275) 41) Define a Production Function. A production function is “the relationship between the quantity of inputs a firm uses and the quantity of outputs it produces. ” (p. G-7) 42) What is Marginal Product of an input? Marginal product of an input is the output produced with one more unit of input. ) What is Marginal Revenue Product of an input? Marginal revenue is “the change in total revenue generated by an additional unit of output. ” (p. 350) It is used to examine effects of various inputs, such as labor, on production. 44) When a firm’s profit is maximized? (Profit Maximizing Rule). A firm’s profit is maximized when the price and output level returns the greatest profit. 45) How demand for an input is determined? Demand for an input is determined based on the demand for output. 46) What is the optimal combination or mix of inputs?
Least Cost Combination). The optimal combination is one that has the minimum inputs and the maximum output at minimal cost. 47) What is Marginal Productivity of an input? 48) What is the Law of Diminishing Marginal Productivity? “An economic rule governing production which holds that if more variable input units are used along with a certain amount of fixed inputs, the overall output might grow at a faster rate initially, then at a steady rate, but ultimately, it will grow at a declining rate. ” (Investigated) 49) What are Economy and Dissection to Scale?
Economies of scale are when average costs of output decline as output increases. Discomposes of scale, on the other hand, are when average costs of output rise as output increases. 50) What is Return to scale and what are the cases it can have? Return to scale is the change in output resulting from the increase in the inputs. The cases it can have is increasing, constant, and decreasing. 51) What is economy of scope? Economy of scope is nearly the same as economy of scale, only it deals with lowering the average cost for a firm in producing two or more products. 2) What a cost?
Cost is what is given up in order to get something else. For example a firm’s cost for a laborer may be ten dollars an hour that person works. 53) Define Fixed and Variable Costs. Give an example of each. Fixed cost is “a cost that does not depend on the quantity of output produced. “(p. 322) For example, a firms monthly rent because no matter how much output a firm has their rent stays the same.. Variable cost is “a cost that depends on the quantity of output produced. “(p. 322) For example, labor is a variable cost because the more output a firm has the more hours or people they have to pay. 4) Define Explicit, and Implicit Costs. Give an example of each. An explicit cost is “a cost that requires an outlay of money. “(p. 244) For example, wages paid to workers or utility payments. An implicit cost “does not require an outlay of money; it is measured by the value, in dollar terms, of benefits that are foregone. “(p. 244) For example the wear and tear on machinery used in production. 55) How Average Costs (variable and fixed) are calculated? Average fixed cost is equal to fixed cost divided by quantity of output.
Average variable cost is equal to variable cost divided by quantity of output. 56) What is the Law of Increasing Cost? Law of increasing cost is a principle that states that once all factors of production, such as, land, labor, and capital are at maximum output and efficiency, producing more will cost more than average. 57) Define Marginal Cost. Give an example. Marginal cost is the cost of producing one more unit. For example it will cost a firm that makes sneakers more money on resources and and more labor to make another pair of sneakers. ) What is Sunk Cost? Give an example. Sunk cost is a cost that cannot be retrieved. For example if a firm invests in a new security system, that is a one time cost and cannot be retrieved once spent. 59) What social cost? Social cost is private cost plus extremities. 60) What is Private Cost? Private cost is incurred when an individual or firm carries out activities of consumption or production. 1) Denned Economic Profit. Economic profit is the “difference between the revenue received from a sale of an output and the opportunity cost of the inputs used. Investigated) 62) Define Economic Cost. Economic cost is the sacrifice involved in performing an activity, or following a decision or course of action. This is usually expressed in terms of the opportunity cost or accounting cost. 63) In microeconomics, what is meant by short run and long run? The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied.