Economists normally assume that the goal of a firm is to earn: (i)
profits as large as possible
, even if it means reducing output.
What do economist assume about people?
Economists assume
that people will make choices in their own self-interest
. They will choose those things that provide the greatest personal benefit, and they’ll avoid or forego those that aren’t as personally valuable and compelling. That’s what we mean by the assumption of rationality.
What do economists assume that the goal of a firm is?
Economists assume that the goal of a firm is
to maximize profits
. … The other important goals, in addition to profit maximization, that firms may pursue, are: cost minimization, economy on scale and the satisfying the demand for product.
Which of these assumptions is often realistic for a firm in the short run?
its fixed cost in the short run and zero in the long run. The firm can vary the number of workers it employs, but not the size of its factory. Which of these assumptions is often realistic for a firm in the short run?
average fixed cost is high
.
What is the most likely explanation for economies of scale?
the most likely explanation for economies of scale is…
specialization of labor
. in the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units. economies of scale because average total cost is falling as output rises.
Which of the following is a firm’s objective?
The main objectives of firms are:
Profit maximisation
.
Sales maximisation
.
Increased market share/market dominance
.
When a good is excludable?
A good is excludable
if the supplier of that good can prevent people who do not pay from consuming it
. cannot be consumed by more than one person at the same time. A good that is both excludable and rival in consumption is a private good.
What are the 5 main assumptions of economics?
- Self- interest: Everyone’s goal is to make choices that maximize their satisfaction. …
- Costs and benefits: Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice.
- Trade- offs: Due to scarcity, choices must be made. …
- Graphs: Real-life situations can be explained and analyzed.
When economists assume people are rational they mean people?
The assumption of rational behavior implies
that people would rather take actions that benefit them versus actions that are neutral or harm them
. Most classical economic theories are based on the assumption that all individuals taking part in an activity are behaving rationally.
Is economics the study of money?
Economics is not just about money
. It is about weighing different choices or alternatives. Some of those important choices involve money, but most do not. Most of your daily, monthly, or life choices have nothing to do with money, yet they are still the subject of economics.
Which costs do not vary with the amount of output a firm produces?
Fixed costs
are always shown as the vertical intercept of the total cost curve; they are the costs incurred when output is zero, so there are no variable costs. You can see in the graph that once production starts, total costs and variable costs rise.
What is the term for the amount of money that a firm receives from the sale of its output?
Definition of
Total Revenue
: the amount a firm receives for the sale of its output. 3.
Which of the following costs will be zero if the firm did not produce anything?
If a firm produces nothing, which of the following costs will be zero? (c)
variable cost
. The firm incurs a fixed cost regardless of how much output…
What are the three types of economies of scale?
- Internal Economies of Scale. This refers to economies that are unique to a firm. …
- External Economies of Scale. These refer to economies of scale enjoyed by an entire industry. …
- Purchasing. …
- Managerial. …
- Technological.
Why do economies of scale occur in the long run?
Economies of scale exist because
the larger scale of production leads to lower average costs
. … The economies of scale curve is a long-run average cost curve, because it allows all factors of production to change.
Which of the following is an example of economies of scale?
Examples of economies of scale include.
To produce tap water
, water companies had to invest in a huge network of water pipes stretching throughout the country. The fixed cost of this investment is very high. However, since they distribute water to over 25 million households, it brings the average cost down.
