Ag Econ: Pre chapter Questions 9: Chapter 7
1. A firm's explicit costs include
The actual payments a firm makes to its factors of production
2. The difference between a firm's total revenue and its explicit costs is the firm's
Accounting Profit
3. The opportunity costs of all resources supplied by a firm's owners are the firm's
Implicit Costs
4. The difference between a firm's total revenue and the sum of its explicit and implicit costs is the firm's
Economic Profit
5. The rationing function of price is to
Distribute scarce goods to those consumers who value them the most highly.
Allocative: Relating to the allocating of resources or funds to a particular area or for a particular purpose.
6. The actual payments a firm makes to its factors of production and other suppliers are its
Explicit costs
7. Accounting profit is the difference between
a firm's total revenue and its explicit costs.
8. The existence of positive economic profit, in the long run, creates an incentive for:
new firms to enter the market.
9. A firm's implicit costs are
The opportunity costs of the resources supplied by the firm's owners.
10. Economic profit is the difference between
a firm's total revenue and the sum of its explicit and implicit costs.
11. Any force that prevents firms from entering a new market is called a ________ to entry.
barrier
Barrier to entry: any force that prevents firms from entering a new market.
12. The role that prices play in distributing scarce goods to those consumers who value them the most highly is known as the
Rationing function of price
13. Economic rent is the part of the payment for a factor of production that is ________ the owner's reservation price.
above
14. A firm's explicit costs include:
The actual payments a firm makes to its factors of production
15. One reason that firms have a strong incentive to develop cost-saving innovations is that these innovations enable the firm to earn an economic profit.
In the short run.
16. In the long run, new firms will enter a market if existing firms are earning a:
Positive economic profit
17. When the market is ______, there are no further opportunities for gain available to individuals.
In equilibrium
18. The opportunity costs of all the resources supplied by a firm's owners are the firm's:
Implicit costs.
19. The individual pursuit of self-interest _____ with the broader interests of society.
does not always coincide
20. Any force that prevents firms from entering a new market is called:
A barrier to entry.
21. The part of the payment for an input that is above the owner's reservation price is economic _____.
rent.
22. True or false: Economists do not believe that it's important to address poverty and inequality because all that matters is whether the market is efficient.
False. Economists realize that there are important social goals besides economic efficiency, but they argue that it is easier to achieve those other goals if the market is efficient.
23. A firm that adopts a new cost-saving innovation will earn an economic profit in:
The short run.
24. When the market is in equilibrium, there are __________ opportunities for gain available to individuals.
no further
25. If the total economic surplus from a market is thought of as a pie to be divided among the participants in the market, then imposing price controls will:
reduce the size of the pie.
26. The broader interests of society are _______ promoted by the individual pursuit of self-interest.
not always
27. In general, price subsidies will _____ total economic surplus.
decrease
28. Economists believe that:
there are important social goals besides economic efficiency.
29. One reason that firms have a strong incentive to develop cost-saving innovations is that these innovations enable the firm to earn an economic profit:
in the short run.
30. Price controls are often designed to help the poor, but the fact that they reduce total economic surplus means that alternative policies such as direct income transfers to the poor:
could make everyone better off.
31. If the government were to subsidize the price of cars, it's likely the total economic surplus would:
fall.