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How does the concept of 'opportunity cost' apply to starting a business?
It represents the value of the next best alternative forgone, like a salary from another job.
How does 'diminishing marginal product' affect hiring decisions?
Firms will hire fewer workers as each additional worker contributes less to total output.
How does 'economic profit' influence a firm's entry into a market?
Firms are more likely to enter a market if they expect to earn a positive economic profit.
How does understanding 'fixed costs' help a business during a recession?
Businesses can better manage their expenses by identifying costs that remain constant regardless of sales volume.
How does 'increasing returns to scale' affect a company's long-term growth strategy?
It encourages expansion, as larger operations become more efficient and profitable.
How does 'negative marginal returns' affect production?
Adding more inputs decreases total production.
How do fixed costs affect short-run production decisions?
Fixed costs must be paid regardless of the production level in the short run.
How does marginal product affect a firm's decision to hire more workers?
A firm will hire more workers as long as the marginal product of labor exceeds the cost of hiring them.
How do increasing returns to scale incentivize firms?
Incentivizes firms to expand and increase production.
How does understanding variable costs help a pizza shop owner?
Helps them determine how much to produce based on the cost of ingredients.
Differentiate between 'accounting profit' and 'economic profit'.
Accounting profit only considers explicit costs, while economic profit includes both explicit and implicit (opportunity) costs.
What are the differences between 'diminishing marginal returns' and 'decreasing returns to scale'?
Diminishing marginal returns is a short-run concept with one input varying, while decreasing returns to scale is a long-run concept with all inputs varying.
Compare 'fixed costs' and 'variable costs'.
Fixed costs do not change with output, while variable costs do.
Compare 'average product' and 'marginal product'.
Average product is the output per unit of input, while marginal product is the additional output from one more unit of input.
Contrast increasing returns to scale and constant returns to scale.
Increasing returns to scale means output more than doubles when inputs double, while constant returns to scale means output doubles when inputs double.
Contrast increasing marginal returns and diminishing marginal returns.
Increasing marginal returns means marginal product is increasing, while diminishing marginal returns means marginal product is decreasing.
What is the difference between explicit and implicit costs?
Explicit costs are direct, out-of-pocket payments, while implicit costs are opportunity costs.
Compare total product and marginal product.
Total product is the total output produced, while marginal product is the change in output from adding one more unit of input.
Differentiate between short-run and long-run production decisions.
In the short run, at least one input is fixed, while in the long run, all inputs are variable.
Contrast accounting profit and economic profit's impact on investment decisions.
Positive accounting profit may encourage investment, but positive economic profit is a better indicator of a worthwhile investment.
Analyze a TP curve when MP is increasing.
TP increases at an increasing rate (steeper slope).
Analyze a TP curve when MP is decreasing.
TP increases at a decreasing rate (less steep slope).
Analyze a TP curve when MP is negative.
TP is decreasing.
What does the shape of the marginal product curve indicate?
The shape indicates the stages of increasing, diminishing, and negative returns.
How is the average product curve related to the marginal product curve?
When MP is above AP, AP is increasing; when MP is below AP, AP is decreasing.
What does the intersection of the MP and AP curves signify?
It signifies the point where AP is at its maximum.
How does the slope of the total product curve relate to marginal product?
The slope of the total product curve at any point represents the marginal product at that point.
What does a downward-sloping marginal product curve indicate?
It indicates diminishing marginal returns.
How can you identify increasing returns to scale on a graph?
Difficult to identify on a simple graph, requires comparing output changes with input changes.
How can you identify decreasing returns to scale on a graph?
Difficult to identify on a simple graph, requires comparing output changes with input changes.