Flashcards on Costs of Production in Microeconomics
Costs of Production in Microeconomics: A Student's Guide
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Production Costs: Microeconomics
29 cards
Card 1
Question: What does the law of supply state about firms' willingness to produce and sell a good as its price changes?
Answer: Firms are willing to produce and sell a greater quantity of a good when the price of the good is higher, which produces an upward-sloping supply curve
Card 2
Question: What is the main focus of the field of industrial organization?
Answer: Studying how firms' decisions about prices and quantities depend on the market conditions they face (e.g., how the number of firms affects market pric
Card 3
Question: In the short run analysis of Caroline's Cookie Factory, what key simplifying assumption is made about the factory and production?
Answer: The size of Caroline's factory is fixed in the short run, and she can vary output only by changing the number of workers employed.
Card 4
Question: Why is the assumption that the factory size is fixed realistic in the short run but not in the long run?
Answer: Because Caroline cannot build a larger factory overnight (short run), but she could do so over a year or two (long run), allowing scale changes then.
Card 5
Question: Define 'production function' as used in the content.
Answer: The production function is the relationship between the quantity of inputs used (here, number of workers) and the quantity of output produced (cookies
Card 6
Question: Define 'marginal product' as used in the content.
Answer: Marginal product is the increase in output that arises from an additional unit of input (e.g., the extra cookies produced by one more worker).
Card 7
Question: Using the table for Caroline's Cookie Factory, how many cookies per hour are produced with 1 worker and with 2 workers?
Answer: With 1 worker: 50 cookies per hour. With 2 workers: 90 cookies per hour.
Card 8
Question: According to the provided table, what is Caroline's total cost of inputs when she hires 3 workers?
Answer: When she hires 3 workers the cost of the factory is $30 and cost of workers is $30, so total cost of inputs is $60.
Card 9
Question: From the table, how does the marginal product change as additional workers are added from 1 to 6?
Answer: Marginal product decreases as workers are added: 1st worker +50, 2nd +40, 3rd +30, 4th +20, 5th +10, 6th +5 (showing diminishing additional output per
Card 10
Question: How does a firm's short-run average total cost change when output increases but factory size is fixed?
Answer: In the short run, with a fixed factory size, increasing output (e.g., hiring more workers) can raise average total cost due to diminishing marginal pr