Review_sheet_for__final_exam_fall_07

Review_sheet_for__final_exam_fall_07 - ECO 211 Final Exam...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO 211 Final Exam Review Sheet Fall 2007 This exam covers material in chapters, 13 (Costs of Production) 14 (Perfect Competition), 15 (Monopoly), 16 (Oligopoly) and 17 (Monopolistic Competition). You need to know the material on antitrust and regulation covered in the last class. Chapter 13: Costs Chapter 13: Production and Costs Know the difference between economic costs and accounting costs. Know the difference between economic profits and accounting profits. Be able to explain why a firm is ‘satisfied’ with economic profits equal to zero. Know that economic costs are the opportunity costs of all inputs used in production—whether the firm makes an explicit cash payment (explicit costs) or if it owns the resource and so makes no explicit payment (implicit costs). Know the difference between the short-run (some input fixed) and the long-run (all inputs variable) for a firm. Short-Run Costs By definition, the Short-Run is a time period so short that one input is fixed. We assume that capital is the fixed input and labor is the variable input. In other words, the short-run production function shows the relationship between the amount of labor used and the quantity of output produced: ) L , K ( F Q = . The single most important assumption regarding the short-run production function is that it exhibits diminishing marginal product of labor . The Law of Diminishing Marginal Returns states that, in the short-run, as the firm uses more labor it will reach a point where the marginal product of labor will decline. The explanation of this law relies on the fact that the amount of capital available for labor to use is fixed in the short-run. Thus, as the firm produces more output (by hiring more labor), the fixed amount of capital is spread over more and more workers. The reduced quantity of capital per worker causes the productivity of labor to fall at the margin.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern