chapter 9 econ 102

question

The economic cost of any resource used to produce a good

answer

the value or worth the resource would have in its best alternative use.

question

economic costs

answer

Payments that must be made to obtain a resource

question

explicit costs definition

answer

the monetary payments a firm makes to purchase resources from others

question

the concept of explicit costs

answer

-A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
-A firm's monetary payments made for the use of resources owned by others.

question

What resources can a firm easily and quickly adjust?

answer

Fuel, Raw materials, and hourly labor

question

total product (TP) definition

answer

The total quantity, or total output, of a particular good or service produced

question

The law of diminishing returns

answer

as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.

question

what remains after a firm has paid its explicit costs?

answer

Accounting profit

question

fixed costs

answer

part of the simple existence of a firm's plant and must be paid even when output is zero.

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

what happens to average fixed cost when output increases

answer

Average fixed cost declines as output increases.

question

Total product

answer

the total quantity of a specific good produced

question

Average fixed cost formula

answer

total fixed cost divided by the amount of output

question

average variable cost formula

answer

Total variable cost divided by output (Q)

question

Fixed costs

answer

do not vary with changes in output

question

Average total cost formula

answer

total fixed cost divided by output plus total variable cost divided by the output

question

Variable costs change with...

answer

the level of output

question

marginal cost (MC) formula

answer

dividing the change in total cost by the change in output

question

"spreading the overhead"

answer

As production increases, average fixed cost declines.

question

marginal decision

answer

A firm's decision about what output level to produce

question

average fixed cost formula

answer

Total fixed cost divided by output

question

Average variable cost formula

answer

total variable cost divided by total output

question

how does an increase in the price of labor effect Average-fixed-cost

answer

no effect

question

Average total cost (ATC) for any output level Q formula

answer

-dividing total cost (TC) by that output (Q).
-adding average fixed cost (AFC) and average variable cost (AVC) at that output.

question

Marginal cost

answer

the extra cost of producing one more unit of output

question

industry and its individual firms

answer

Firms can undertake all desired resource adjustments in the long run.

question

a firm

answer

Its decisions regarding what output level to produce are typically marginal decisions.

question

A planning curve is also called...

answer

Long run average-total-cost curve

question

Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?

answer

In the long run all resources and inputs are variable.

question

effects of an increase in the price of labor on the cost curves

answer

-The average-fixed-cost curve remains the same.
-The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.

question

what explains the downward-sloping part of the long-run average-total-cost curve?

answer

Economies of scale

question

the long run

answer

firms are able to adjust all resources

question

What does the long-run average-total-cost curve show?

answer

The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size

question

examples of labor specialization

answer

-Hiring more workers in order to subdivide tasks
-Assigning each worker one task instead of five or six

question

The U-shape of the long-run average-total-cost curve results from which of the following?

answer

-Diseconomies of scale

-Economies of scale

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

constant returns to scale

answer

A firm's 10% increase in given inputs, causing a proportionate 10% increase in output

question

What is another term for economies of scale?

answer

Economies of mass production

question

Increased ______ ______ becomes more achievable as a plant increases in size.

answer

labor specialization

question

Start-up firms achieve ______ __ ______ from learning by doing and through increased specialization of labor, management, and equipment.

answer

economies of scale

question

example of Learning by doing

answer

A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise.

question

The flat section

answer

section of a long-run average total cost curve depicts constant returns to scale

question

minimum efficient scale

answer

The lowest level of output at which a firm can minimize long-run average costs

question

By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?

answer

Downward and to the right

question

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the effects of the law of ______.

answer

diminishing returns

question

True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.

answer

True

question

True or false: Important determinants of an industry's structure are economies of scale and revenue.

answer

False

question

What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?

answer

$120,000

question

If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?

answer

$24,000

question

Your company's total sales revenue for the month is $150,000; the costs to produce your products are $12,000 for rent, $6,000 for utilities, and $42,000 for employee wages. What is your accounting profit?

answer

$90,000

1 of 50

question

The economic cost of any resource used to produce a good

answer

the value or worth the resource would have in its best alternative use.

question

economic costs

answer

Payments that must be made to obtain a resource

question

explicit costs definition

answer

the monetary payments a firm makes to purchase resources from others

question

the concept of explicit costs

answer

-A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
-A firm's monetary payments made for the use of resources owned by others.

question

What resources can a firm easily and quickly adjust?

answer

Fuel, Raw materials, and hourly labor

question

total product (TP) definition

answer

The total quantity, or total output, of a particular good or service produced

question

The law of diminishing returns

answer

as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.

question

what remains after a firm has paid its explicit costs?

answer

Accounting profit

question

fixed costs

answer

part of the simple existence of a firm's plant and must be paid even when output is zero.

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

what happens to average fixed cost when output increases

answer

Average fixed cost declines as output increases.

question

Total product

answer

the total quantity of a specific good produced

question

Average fixed cost formula

answer

total fixed cost divided by the amount of output

question

average variable cost formula

answer

Total variable cost divided by output (Q)

question

Fixed costs

answer

do not vary with changes in output

question

Average total cost formula

answer

total fixed cost divided by output plus total variable cost divided by the output

question

Variable costs change with...

answer

the level of output

question

marginal cost (MC) formula

answer

dividing the change in total cost by the change in output

question

"spreading the overhead"

answer

As production increases, average fixed cost declines.

question

marginal decision

answer

A firm's decision about what output level to produce

question

average fixed cost formula

answer

Total fixed cost divided by output

question

Average variable cost formula

answer

total variable cost divided by total output

question

how does an increase in the price of labor effect Average-fixed-cost

answer

no effect

question

Average total cost (ATC) for any output level Q formula

answer

-dividing total cost (TC) by that output (Q).
-adding average fixed cost (AFC) and average variable cost (AVC) at that output.

question

Marginal cost

answer

the extra cost of producing one more unit of output

question

industry and its individual firms

answer

Firms can undertake all desired resource adjustments in the long run.

question

a firm

answer

Its decisions regarding what output level to produce are typically marginal decisions.

question

A planning curve is also called...

answer

Long run average-total-cost curve

question

Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?

answer

In the long run all resources and inputs are variable.

question

effects of an increase in the price of labor on the cost curves

answer

-The average-fixed-cost curve remains the same.
-The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.

question

what explains the downward-sloping part of the long-run average-total-cost curve?

answer

Economies of scale

question

the long run

answer

firms are able to adjust all resources

question

What does the long-run average-total-cost curve show?

answer

The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size

question

examples of labor specialization

answer

-Hiring more workers in order to subdivide tasks
-Assigning each worker one task instead of five or six

question

The U-shape of the long-run average-total-cost curve results from which of the following?

answer

-Diseconomies of scale

-Economies of scale

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

constant returns to scale

answer

A firm's 10% increase in given inputs, causing a proportionate 10% increase in output

question

What is another term for economies of scale?

answer

Economies of mass production

question

Increased ______ ______ becomes more achievable as a plant increases in size.

answer

labor specialization

question

Start-up firms achieve ______ __ ______ from learning by doing and through increased specialization of labor, management, and equipment.

answer

economies of scale

question

example of Learning by doing

answer

A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise.

question

The flat section

answer

section of a long-run average total cost curve depicts constant returns to scale

question

minimum efficient scale

answer

The lowest level of output at which a firm can minimize long-run average costs

question

By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?

answer

Downward and to the right

question

answer

diminishing returns

question

True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.

answer

True

question

True or false: Important determinants of an industry's structure are economies of scale and revenue.

answer

False

question

What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?

answer

$120,000

question

If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?

answer

$24,000

question

answer

$90,000

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chapter 9 econ 102

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