Exam 2 Study Guide

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Exam 2 Study Guide

This study guide gives you a basis of what you need to know from the lectures in class. I recommend also reading the textbook and getting the definitions for the define and explain the significance questions from there. Best of luck!


Pages:
8
Type:
Study Guide
School:
University of Oklahoma
Course:
Econ 1123 - Princ. of Econ-Micro
Edition:
1

Unformatted text preview:

Exam # 2 Study Guide Lectures: 10-17 Lecture 10 (February 23) Concepts covered: I. Outputs The short run- A time frame in which the quantity of at least one factor of production is fixed. (some factors used by the firm are fixed in quantity. i.e. technology, buildings, capital.) in the short run. You can’t just build a new factory in a week, or even a month. Note: other factors used by the firm vary with output (such as labor, raw materials, energy.) In the short run, to increase output the firm must increase the quantity of variable factors it uses. Fixed Factors- Cannot be changed in the short run Variable Factors- Production can be varied at any point The Long Run- A time frame in which the quantities of all factors of production can be varied. This means that the firm can change its plant size, as well as the quantity of all its other factors in the long run. Note: long run decisions are not easily reversed II. Costs Looking at production and costs in the short run: Total product (x), which is the maximum output that a given quantity of labor can produce Marginal Product of Labor- the income in total product that results from a one- unit increase in the quantity of labor employed with all other inputs remaining the same MPL= Change in X/ Change in labor Average Product of Labor (APL) which equals total product divided by the quantity of labor employed. APL= stuff/ labor (number of workers) Labor Total Output MPL APL 1 30 - 30/1= 30 2 70 (70-30)/(2-1)=40 70/2= 35 3 120 (120-70)/(3-2)=50 120/3= 40 4 160 40 160/4=40 5 190 30 190/5=38 6 210 20 210/6= 35 Econ 1123 1st Edition This will give us a graph that shows how workers initially become more productive when they are increasing but after they increase too much they can become less productive (perhaps from a loss of the space they need to work efficiently) Note: The line for the marginal will always intersect the average line at the highest point on the average line Note: No table like this will be tested because Clark would rather us understand concepts than do arithmetic, this is just to help your understanding As a business you care about this because you want peak productivity from your employees Lecture 11 (February 25) Concepts covered: In the long run ALL factors (capital and labor) are variable-> there are no fixed costs or fixed factors You will increase the amount yielded based on how many workers and how many machines. Definitions: Total Cost(TC)- the cost of all factors of production Total fixed Cost (TFC)- the cost of the firms fixed factors. Fixed costs do not change with output Total variable cost (TVC)- the cost of the firms variable factors. Variable costs change with output. Hence the reason they are called variable. Total cost equals total fixed cost plus total variable cost, or TC= TFC+TVC Marginal Cost (MC)- The increase ...


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