chap eleven- micro midterm 3 - Custom Scholars
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# chap eleven- micro midterm 3

question
long run
a period in which a firm can vary all inputs, such as adopting new technologies, and changing the sizee of its physical plant
question
short run
a period in which at least one fof a firm's inputs is fixed
question
variable cost (VC)
-costs that change as output changes

-e.g. the cost of cheese and wages paid to workers
question
fixed cost (FC)
-costs that remain constant as output changes

-e.g. the cost of leasing ovens and restaurant space
question
total cost (TC)
-the cost of all inputs used in a production
-equal to the sum of fixed and variable costs

TC=FC+VC
question
in the long run:

a. there are no variable costs
b. there are no fixed costs
c. there are no total costs
d. all costs are fixed
b. there are no fixed costs
question
FC=

a. TC-VC
b. TC+VC
c. VC-TC
d. VC-FC
a. TC-VC
question
explicit costs
-costs that involve explicitly spending money
-sometimes called "accounting costs"

-e.g. issuing a paycheck to an employee
question
economic cost
costs that include both implicit and explicit costs
question
implicit costs
-opportunity cost that do not involve explicitly spending money

-e.g. the salary you could have earned doing something else
question
You own the building that your restaurant is in. You could have rented the building out to someone else for \$5,000 per month. The opportunity cost of using the building for your restaurant is

a. \$5,000 per month
b. zero, because you own the building
a. \$5,000 per month
question
prodution function
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
question
Marginal Product of Labor (MPL)
-the additional output resulting from hiring one more unit of labor
-in our example, the additional output from hiring one more worker

𝑀𝑃𝐿 = ∆𝑄/∆𝐿
question
Law of Diminishing Returns
-in the short run, the marginal product of a variable input will eventually decline

-e.g. too many pizza chefs crowding around a fixed number of ovens
question
Average Product of Labor (APL)
-output per unit of labor

-APL=Q/L
question
If, with a given amount of labor, marginal product equals 80 and an average product equals 65, then

a. marginal product must be rising
b. marginal product must be falling
c. average product must be rising
d. average product must be falling
c. average product must be rising
question
Marginal Cost
-the increase in total cost from producing one more unit of output

-MC=△TC/△Q
question
Average Total Cost
ATC=TC/Q
question
why does marginal cost eventually fall?
specialization
question
why does marginal eventually rise?
law of diminishing returns
question
if, at a given output, marginal cost equals \$0.50 and an average total cost also equals \$0.50 then

a. average total cost is at its maximum
b. average total cost is at its minimum
c. marginal cost is at its maximum
d. marginal cost is at its minimum
b. average total cost is at its minimum
question
AFV=

a. ATC+AVC
b. AVC-ATC
c. ATC- AVC
d. AFC-AVC
c. ATC- AVC
question
Long Run Average Cost Curve
- a curve showing the lowest average cost at which the firm is able to produce a given quantity of output in the long run

-the "envelope" of all possible short- run average total cost curves
question
economies of scale
-when long run average cost falls as output increases

-ex) ability to adopt large-scale technologies
question
diseconomies of scale
-when long run average cost rises as output increases

-difficulty managing a large operation
question
constant returns to scale
when long run average cost remains constant as output increases
question
minimum efficient scale
-the output at which all economies of scale are exhausted
-when LRAC is at a minimum
question
minimum efficient scale: in perfectly competitive market
firms tend to produce at their minimum efficient scale
question
diseconomies of scale is

a. the same as the law of diminishing returns
b. a short-run concept
c. a long-run concept
d. when LRAC is at its minimum
c. a long run concept
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question
long run
a period in which a firm can vary all inputs, such as adopting new technologies, and changing the sizee of its physical plant
question
short run
a period in which at least one fof a firm's inputs is fixed
question
variable cost (VC)
-costs that change as output changes

-e.g. the cost of cheese and wages paid to workers
question
fixed cost (FC)
-costs that remain constant as output changes

-e.g. the cost of leasing ovens and restaurant space
question
total cost (TC)
-the cost of all inputs used in a production
-equal to the sum of fixed and variable costs

TC=FC+VC
question
in the long run:

a. there are no variable costs
b. there are no fixed costs
c. there are no total costs
d. all costs are fixed
b. there are no fixed costs
question
FC=

a. TC-VC
b. TC+VC
c. VC-TC
d. VC-FC
a. TC-VC
question
explicit costs
-costs that involve explicitly spending money
-sometimes called "accounting costs"

-e.g. issuing a paycheck to an employee
question
economic cost
costs that include both implicit and explicit costs
question
implicit costs
-opportunity cost that do not involve explicitly spending money

-e.g. the salary you could have earned doing something else
question
You own the building that your restaurant is in. You could have rented the building out to someone else for \$5,000 per month. The opportunity cost of using the building for your restaurant is

a. \$5,000 per month
b. zero, because you own the building
a. \$5,000 per month
question
prodution function
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
question
Marginal Product of Labor (MPL)
-the additional output resulting from hiring one more unit of labor
-in our example, the additional output from hiring one more worker

𝑀𝑃𝐿 = ∆𝑄/∆𝐿
question
Law of Diminishing Returns
-in the short run, the marginal product of a variable input will eventually decline

-e.g. too many pizza chefs crowding around a fixed number of ovens
question
Average Product of Labor (APL)
-output per unit of labor

-APL=Q/L
question
If, with a given amount of labor, marginal product equals 80 and an average product equals 65, then

a. marginal product must be rising
b. marginal product must be falling
c. average product must be rising
d. average product must be falling
c. average product must be rising
question
Marginal Cost
-the increase in total cost from producing one more unit of output

-MC=△TC/△Q
question
Average Total Cost
ATC=TC/Q
question
why does marginal cost eventually fall?
specialization
question
why does marginal eventually rise?
law of diminishing returns
question
if, at a given output, marginal cost equals \$0.50 and an average total cost also equals \$0.50 then

a. average total cost is at its maximum
b. average total cost is at its minimum
c. marginal cost is at its maximum
d. marginal cost is at its minimum
b. average total cost is at its minimum
question
AFV=

a. ATC+AVC
b. AVC-ATC
c. ATC- AVC
d. AFC-AVC
c. ATC- AVC
question
Long Run Average Cost Curve
- a curve showing the lowest average cost at which the firm is able to produce a given quantity of output in the long run

-the "envelope" of all possible short- run average total cost curves
question
economies of scale
-when long run average cost falls as output increases

-ex) ability to adopt large-scale technologies
question
diseconomies of scale
-when long run average cost rises as output increases

-difficulty managing a large operation
question
constant returns to scale
when long run average cost remains constant as output increases
question
minimum efficient scale
-the output at which all economies of scale are exhausted
-when LRAC is at a minimum
question
minimum efficient scale: in perfectly competitive market
firms tend to produce at their minimum efficient scale
question
diseconomies of scale is

a. the same as the law of diminishing returns
b. a short-run concept
c. a long-run concept
d. when LRAC is at its minimum
c. a long run concept

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