ECON 1001: Chapter 9 (Businesses and Costs of Production) - Custom Scholars
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# ECON 1001: Chapter 9 (Businesses and Costs of Production)

question
The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.
a) absolute
b) economic
c) accounting
d) explicit
b) economic

why?
A firm's economic costs are the sum of its explicit and implicit costs, both of which are considered opportunity costs.
question
Which of the following explains the concept of explicit costs?
* 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.
* A firm's monetary payments that self-employed resources could have earned in their best alternative use.
* A firm's monetary payments received for the use of resources owned by the firm.
* 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
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?
\$108,000
\$90,000
\$102,000
\$132,000
\$90,000
question
What is the total revenue if the economic profit is \$24,000 and the economic costs are \$96,000?
\$120,000

why?
TR = Economic profit
Economic profit = total revenue - total cost
Total revenue = Economic profit + total cost
question
True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.
True.
question
Which best describes economic costs?
a) Explicit plus accounting costs
b) Payments that must be made to obtain a resource
c) The lowest value attributed to a resource
d) Implicit costs
b) Payments that must be made to obtain a resource
question
What is the term for the total quantity of a specific good produced?
a) Marginal product
b) Total product
c) Average product
d) Normal product
b) Total product
question
_____ costs are the monetary payments a firm makes to purchase resources from others.
Explicit
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 ______.
a) diminishing marginal costs
b) diminishing returns
c) supply and demand
d) marginal utility
b) diminishing returns
question
Accounting profit is what remains after a firm has paid its _______ costs.
a) opportunity
b) explicit and implicit
c) explicit
d) implicit
c) explicit
question
What happens to marginal product when total product is increasing but at a decreasing rate?
a) Marginal product is positive but falling.
b) Marginal product is positive and rising.
c) Marginal product is negative and falling.
d) Marginal product is negative but rising.
a) Marginal product is positive but falling.
question
If economic cost is \$96,000 and total revenue is \$120,000, what is the economic profit?
\$24,000
question
Which of the following resources can a firm easily and quickly adjust?
* Size of the factory
* Fuel
* Production-line machinery
* Raw materials
* Hourly labor
* Fuel
* Raw materials
* Hourly labor
question
Which costs do not vary with changes in output?
a) Labor
b) Fixed
c) Marginal
d) Variable
b) Fixed
question
What is the definition of total product (TP)?
a) The total output of a particular good less total production costs
b) The total quantity, or total output, of a particular good or service produced
c) The total output per unit of labor
d) The total additional output or added product associated with adding a unit of a variable resource to the production process
b) The total quantity, or total output, of a particular good or service produced
question
A firm's insurance premiums are generally considered _____ costs.
fixed
question
The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.
a) marginal
b) variable
c) diminishing
d) fixed
c) diminishing
question
What happens to fixed costs when the level of production output reaches zero?
a) They decrease to zero.
b) They remain unchanged.
c) They become negative.
d) They double.
b) They remain unchanged.

THE WHOLE POINT OF BEING FIXED!
question
What happens to marginal product when total product is increasing at an increasing rate?
a) Marginal product becomes negative.
b) Marginal product is decreasing.
c) Marginal product is staying the same.
d) Marginal product is rising.
d) Marginal product is rising.
question
Which best characterizes variable costs?
a) Costs that increase when output declines and decrease when output increases
b) Costs that consider the average cost over a period of time
c) Costs that do not change with the level of output
d) Costs that change with the level of output
d) Costs that change with the level of output
question
_____ cost is the sum of fixed cost and variable cost at each level of output.
Total
question
_____ costs are part of the simple existence of a firm's plant and must be paid even when output is zero.
Fixed
question
Which of the following is true of average fixed cost when output increases?
a) Average fixed cost stays the same as output increases.
b) Average fixed cost declines initially, reaches a minimum, and then increases.
c) Average fixed cost increases initially, reaches a maximum, and then decreases.
d) Average fixed cost declines as output increases.
d) Average fixed cost declines as output increases.

why?
equation for AFC = TFC/Q, so when output gets bigger, AFC gets smaller (inverse relationship)
question
Which of the following are examples of fixed costs?
* Interest on a firm's debts
* Rental payments
* Labor
* Transportation
* Interest on a firm's debts
* Rental payments
question
Average fixed cost equals total fixed cost divided by the ______.
a) amount of output
b) marginal product of labor
c) quantity of labor
d) total costs
a) amount of output
question
A firm cannot avoid paying fixed costs in the _____ run.
short
question
What is the average fixed cost if total fixed cost is \$100, total variable cost is \$50, and output is 20?
a) \$80
b) \$5
c) \$150
d) \$2,000
b) \$5

why?
AFC = TFC/output
100/20 = 5
question
Variable costs change with the level of _____.
output
question
What is average variable cost if total variable cost is \$500, total fixed cost is \$100, and output is 50?
a) \$10
b) \$600
c) \$450
d) \$10.20
a) \$10

why?
AVC = TVC/Q
question
How is total cost calculated?
a) By dividing total fixed cost into total variable cost
b) By adding total fixed cost and total variable cost
c) By multiplying total fixed cost and total variable cost
d) By subtracting total fixed cost from total variable cost
b) By adding total fixed cost and total variable cost
question
Average variable cost equals total variable cost divided by total ______.
a) revenue
b) price
c) costs
d) output
d) output
question
a) As production increases, average fixed cost increases.
b) As production increases, average fixed cost declines.
c) As production increases, average variable cost always increases.
d) As production increases, average fixed cost declines and then increases.
b) As production increases, average fixed cost declines.
question
Which of the following best describes the average variable cost curve?
a) It is upward sloping throughout.
b) It is downward sloping throughout.
c) It is L-shaped.
d) It is U-shaped.
d) It is U-shaped.
question
How is average fixed cost determined?
a) Total fixed cost divided by opportunity cost
b) Total fixed cost divided by total variable cost
c) Total fixed cost divided by output
d) Total fixed cost divided by marginal output
c) Total fixed cost divided by output
question
Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?
a) Average fixed cost
b) Average total cost
c) Average variable cost
d) Average marginal cost
b) Average total cost
question
Suppose the total fixed cost of a firm is \$500, the total variable cost is \$200, and the output produced is 5 units. The average fixed cost of the firm is ______.
a) \$100
b) \$140
c) \$495
d) \$250
a) \$100

why?
500/5 = 100
question
If total variable cost is \$100, total fixed cost is \$100, and output is 10, what is average variable cost?
\$10
question
What is the definition of average variable cost?
a) Total variable cost divided by change in output (Q)
b) Total variable cost divided by total fixed cost (TFC)
c) Total variable cost divided by marginal cost (MC)
d) Total variable cost divided by output (Q)
d) Total variable cost divided by output (Q)
question
What is the term for the extra cost of producing one more unit of output?
a) Variable cost
b) Total cost
c) Marginal cost
d) Fixed cost
c) Marginal cost

From chapter 1, marginal means extra 😉
question
Which curve first falls and then rises?
a) Average variable cost curve
b) Demand curve
c) Average fixed cost curve
d) Marginal revenue curve
a) Average variable cost curve
question
What methods can be used to calculate average total cost?
* Average fixed cost plus average variable cost
* Total cost divided by output (Q)
* Total fixed cost divided by output (Q)
* Total variable cost divided by output (Q)
* Average fixed cost plus average variable cost
* Total cost divided by output (Q)
question
If total cost rises from \$300 to \$700 when one additional unit of output is produced, what is the marginal cost?
\$400
question
How is marginal cost (MC) calculated?
a) By dividing the change in total cost by the change in output
b) By dividing the change in total fixed cost by the change in output
c) By dividing the change in total fixed cost by the total output
d) By dividing the change in output by the change in total cost
a) By dividing the change in total cost by the change in output
question
Which of the following costs can a firm control directly and immediately?
a) Marginal costs
b) Fixed costs
c) Average variable costs
d) Total costs
a) Marginal costs
question
A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?
a) Average-cost data
b) Marginal data
c) Fixed-cost data
d) Total-cost data
b) Marginal data
question
What is the marginal cost when output changes from 300 to 301 units and total cost rises from \$400 to \$500?
\$100
question
An increase in the price of labor has no effect on which cost curve?
a) Average-variable-cost
b) Average-total-cost
c) Marginal-cost
d) Average-fixed-cost
d) Average-fixed-cost
question
Over what period of time can an industry and firms in that industry adjust all resource inputs used?
a) The short run
b) Both the long run and the short run
c) Neither the long run nor the short run.
d) The long run
d) The long run
question
A planning curve is another term for which of the following?
a) Long run average-variable-cost curve
b) Long run average-fixed-cost curve
c) Long run average-total-cost curve
d) Long run average-marginal-cost curve
c) Long run average-total-cost curve
question
What type of cost can be saved by not producing the last unit?
a) Average fixed
b) Total
c) Fixed
d) Marginal
d) Marginal
question
A firm's decision about what output level to produce is typically a ______ decision.
a) coordinated
b) marginal
c) sequential
d) production
b) marginal
question
What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?
a) The average-variable-cost and average-total-cost curves shift upward, and the marginal-cost curve shifts downward.
b) The average-variable-cost, average-total-cost, and marginal-cost curves shift downward.
c) The average-fixed-cost curve remains the same.
d) The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
c) The average-fixed-cost curve remains the same.
d) The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.

why?
Labor is a variable output, and doesn't affect fixed costs.
question
In the ____ run, firms are able to adjust all resources.
long
question
Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?
a) In the short run all resources and inputs are fixed.
b) In the long run all resources and inputs are variable.
c) In the short run all resources and inputs are variable.
d) In the long run all resources and inputs are fixed.
b) In the long run all resources and inputs are variable.
question
What does the long-run average-total-cost curve show?
a) The maximum level of output possible in the short run at all plant sizes
b) The lowest minimum short-run average-total-cost curve at which a firm must produce to make a profit
c) The sum total of all of the short-run average-total-cost curves
d) 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
d) 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
Economies of scale explain the downward-sloping part of the ______ curve.
a) long-run average-total-cost
b) long-run average-fixed-cost
c) short-run average-variable-cost
d) short-run average-total-cost
a) long-run average-total-cost
question
Which of the following is an example of labor specialization?
* Assigning each worker five or six unique tasks
* Hiring more workers in order to subdivide tasks
* Hiring fewer workers and creating fewer job classifications
* Hiring more workers in order to subdivide tasks
question
A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?
Marginal data.
question
How does labor specialization allow a worker to become more proficient?
a) It allows a worker to focus on more tasks to become a jack-of-all-trades.
b) It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.
c) It refers to the process developed by unions to protect both businesses and workers from inefficient production technology.
d) It increases the number of unskilled tasks a worker is able to perform.
b) It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.
question
The U-shape of the long-run average-total-cost curve results from which of the following?
* Fixed labor costs
* Economies of scale
* Rising resource prices
* Diseconomies of scale
* Economies of scale
* Diseconomies of scale
question
A marketing supervisor works in a small plant where she performs a range of duties. As the company grows and hires additional supervisors, she is able to spend the bulk of her time in her area of expertise. In this example, the company has increased its ______.
a) efficient capital
b) diseconomies of scale
c) division of labor
d) managerial specialization
d) managerial specialization
question
What is another term for economies of scale?
a) Diseconomies of mass production
b) Economies of mass production
c) Economies of output
d) Diseconomies of scale
b) Economies of mass production
question
Learning by doing contributes to a firm's ______.
a) diseconomies of scale
b) economies of scale
c) fixed costs
d) constant returns to scale
b) economies of scale
question
Increased labor ______ becomes more achievable as a plant increases in size.
a) generalization
b) supply
c) specialization
d) demand
c) specialization
question
Which of the following sections of a long-run average total cost curve depicts constant returns to scale?
a) The upward-sloping section
b) The downward-sloping section
c) The beginning high point of the curve
d) The flat section
d) The flat section

why?
this is the range that long-run average cost doesn't change
question
Greater labor specialization has which of the following effects?
a) It increases production costs.
b) It permits workers to specialize in more varied areas, so they do not get bored.
c) It allows workers to focus on more tasks rather than fewer.
d) It eliminates the loss of time that occurs whenever a worker shifts from one task to another.
d) It eliminates the loss of time that occurs whenever a worker shifts from one task to another.
question
The lowest level of output at which a firm can minimize long-run average costs is called ______.
a) minimum efficient scale
b) economies of scale
c) maximum efficient scale
d) diseconomies of scale
a) minimum efficient scale
question
Start-up firms achieve ____ of scale from learning by doing and through increased specialization of labor, management, and equipment.
economies
question
Which of the following result from managerial specialization?
* Decreased productivity
* Higher unit costs
* Greater efficiency
* Lower unit costs
* Greater efficiency
* Lower unit costs
question
A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?
a) Slow decision making
b) Labor specialization
c) Efficient capital
d) Learning by doing
d) Learning by doing
question
Which of the following illustrates constant returns to scale?
a) A firm's 10% increase in given inputs, causing a 30% increase in output
b) A firm's 10% increase in given inputs, causing a proportionate 10% increase in output
c) A firm's 10% increase in given inputs, causing a 5% increase in output
d) A firm's 10% increase in given inputs, causing a 20% increase in output
b) A firm's 10% increase in given inputs, causing a proportionate 10% increase in output
question
True or false: Important determinants of an industry's structure are economies of scale and revenue.
False.

why?
Important determinants of an industry's structure are economies and diseconomies of scale.
question
By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?
Downward and to the right.
question
Learning by doing contributes to a firm's ______.
a) diseconomies of scale
b) fixed costs
c) economies of scale
d) constant returns to scale
c) economies of scale
question
What three countries were originally the ones involved in NAFTA?
The North American countries:
- U.S.
- Mexico
1 of 75
question
The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.
a) absolute
b) economic
c) accounting
d) explicit
b) economic

why?
A firm's economic costs are the sum of its explicit and implicit costs, both of which are considered opportunity costs.
question
Which of the following explains the concept of explicit costs?
* 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.
* A firm's monetary payments that self-employed resources could have earned in their best alternative use.
* A firm's monetary payments received for the use of resources owned by the firm.
* 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
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?
\$108,000
\$90,000
\$102,000
\$132,000
\$90,000
question
What is the total revenue if the economic profit is \$24,000 and the economic costs are \$96,000?
\$120,000

why?
TR = Economic profit
Economic profit = total revenue - total cost
Total revenue = Economic profit + total cost
question
True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.
True.
question
Which best describes economic costs?
a) Explicit plus accounting costs
b) Payments that must be made to obtain a resource
c) The lowest value attributed to a resource
d) Implicit costs
b) Payments that must be made to obtain a resource
question
What is the term for the total quantity of a specific good produced?
a) Marginal product
b) Total product
c) Average product
d) Normal product
b) Total product
question
_____ costs are the monetary payments a firm makes to purchase resources from others.
Explicit
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 ______.
a) diminishing marginal costs
b) diminishing returns
c) supply and demand
d) marginal utility
b) diminishing returns
question
Accounting profit is what remains after a firm has paid its _______ costs.
a) opportunity
b) explicit and implicit
c) explicit
d) implicit
c) explicit
question
What happens to marginal product when total product is increasing but at a decreasing rate?
a) Marginal product is positive but falling.
b) Marginal product is positive and rising.
c) Marginal product is negative and falling.
d) Marginal product is negative but rising.
a) Marginal product is positive but falling.
question
If economic cost is \$96,000 and total revenue is \$120,000, what is the economic profit?
\$24,000
question
Which of the following resources can a firm easily and quickly adjust?
* Size of the factory
* Fuel
* Production-line machinery
* Raw materials
* Hourly labor
* Fuel
* Raw materials
* Hourly labor
question
Which costs do not vary with changes in output?
a) Labor
b) Fixed
c) Marginal
d) Variable
b) Fixed
question
What is the definition of total product (TP)?
a) The total output of a particular good less total production costs
b) The total quantity, or total output, of a particular good or service produced
c) The total output per unit of labor
d) The total additional output or added product associated with adding a unit of a variable resource to the production process
b) The total quantity, or total output, of a particular good or service produced
question
A firm's insurance premiums are generally considered _____ costs.
fixed
question
The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.
a) marginal
b) variable
c) diminishing
d) fixed
c) diminishing
question
What happens to fixed costs when the level of production output reaches zero?
a) They decrease to zero.
b) They remain unchanged.
c) They become negative.
d) They double.
b) They remain unchanged.

THE WHOLE POINT OF BEING FIXED!
question
What happens to marginal product when total product is increasing at an increasing rate?
a) Marginal product becomes negative.
b) Marginal product is decreasing.
c) Marginal product is staying the same.
d) Marginal product is rising.
d) Marginal product is rising.
question
Which best characterizes variable costs?
a) Costs that increase when output declines and decrease when output increases
b) Costs that consider the average cost over a period of time
c) Costs that do not change with the level of output
d) Costs that change with the level of output
d) Costs that change with the level of output
question
_____ cost is the sum of fixed cost and variable cost at each level of output.
Total
question
_____ costs are part of the simple existence of a firm's plant and must be paid even when output is zero.
Fixed
question
Which of the following is true of average fixed cost when output increases?
a) Average fixed cost stays the same as output increases.
b) Average fixed cost declines initially, reaches a minimum, and then increases.
c) Average fixed cost increases initially, reaches a maximum, and then decreases.
d) Average fixed cost declines as output increases.
d) Average fixed cost declines as output increases.

why?
equation for AFC = TFC/Q, so when output gets bigger, AFC gets smaller (inverse relationship)
question
Which of the following are examples of fixed costs?
* Interest on a firm's debts
* Rental payments
* Labor
* Transportation
* Interest on a firm's debts
* Rental payments
question
Average fixed cost equals total fixed cost divided by the ______.
a) amount of output
b) marginal product of labor
c) quantity of labor
d) total costs
a) amount of output
question
A firm cannot avoid paying fixed costs in the _____ run.
short
question
What is the average fixed cost if total fixed cost is \$100, total variable cost is \$50, and output is 20?
a) \$80
b) \$5
c) \$150
d) \$2,000
b) \$5

why?
AFC = TFC/output
100/20 = 5
question
Variable costs change with the level of _____.
output
question
What is average variable cost if total variable cost is \$500, total fixed cost is \$100, and output is 50?
a) \$10
b) \$600
c) \$450
d) \$10.20
a) \$10

why?
AVC = TVC/Q
question
How is total cost calculated?
a) By dividing total fixed cost into total variable cost
b) By adding total fixed cost and total variable cost
c) By multiplying total fixed cost and total variable cost
d) By subtracting total fixed cost from total variable cost
b) By adding total fixed cost and total variable cost
question
Average variable cost equals total variable cost divided by total ______.
a) revenue
b) price
c) costs
d) output
d) output
question
a) As production increases, average fixed cost increases.
b) As production increases, average fixed cost declines.
c) As production increases, average variable cost always increases.
d) As production increases, average fixed cost declines and then increases.
b) As production increases, average fixed cost declines.
question
Which of the following best describes the average variable cost curve?
a) It is upward sloping throughout.
b) It is downward sloping throughout.
c) It is L-shaped.
d) It is U-shaped.
d) It is U-shaped.
question
How is average fixed cost determined?
a) Total fixed cost divided by opportunity cost
b) Total fixed cost divided by total variable cost
c) Total fixed cost divided by output
d) Total fixed cost divided by marginal output
c) Total fixed cost divided by output
question
Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?
a) Average fixed cost
b) Average total cost
c) Average variable cost
d) Average marginal cost
b) Average total cost
question
Suppose the total fixed cost of a firm is \$500, the total variable cost is \$200, and the output produced is 5 units. The average fixed cost of the firm is ______.
a) \$100
b) \$140
c) \$495
d) \$250
a) \$100

why?
500/5 = 100
question
If total variable cost is \$100, total fixed cost is \$100, and output is 10, what is average variable cost?
\$10
question
What is the definition of average variable cost?
a) Total variable cost divided by change in output (Q)
b) Total variable cost divided by total fixed cost (TFC)
c) Total variable cost divided by marginal cost (MC)
d) Total variable cost divided by output (Q)
d) Total variable cost divided by output (Q)
question
What is the term for the extra cost of producing one more unit of output?
a) Variable cost
b) Total cost
c) Marginal cost
d) Fixed cost
c) Marginal cost

From chapter 1, marginal means extra 😉
question
Which curve first falls and then rises?
a) Average variable cost curve
b) Demand curve
c) Average fixed cost curve
d) Marginal revenue curve
a) Average variable cost curve
question
What methods can be used to calculate average total cost?
* Average fixed cost plus average variable cost
* Total cost divided by output (Q)
* Total fixed cost divided by output (Q)
* Total variable cost divided by output (Q)
* Average fixed cost plus average variable cost
* Total cost divided by output (Q)
question
If total cost rises from \$300 to \$700 when one additional unit of output is produced, what is the marginal cost?
\$400
question
How is marginal cost (MC) calculated?
a) By dividing the change in total cost by the change in output
b) By dividing the change in total fixed cost by the change in output
c) By dividing the change in total fixed cost by the total output
d) By dividing the change in output by the change in total cost
a) By dividing the change in total cost by the change in output
question
Which of the following costs can a firm control directly and immediately?
a) Marginal costs
b) Fixed costs
c) Average variable costs
d) Total costs
a) Marginal costs
question
A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?
a) Average-cost data
b) Marginal data
c) Fixed-cost data
d) Total-cost data
b) Marginal data
question
What is the marginal cost when output changes from 300 to 301 units and total cost rises from \$400 to \$500?
\$100
question
An increase in the price of labor has no effect on which cost curve?
a) Average-variable-cost
b) Average-total-cost
c) Marginal-cost
d) Average-fixed-cost
d) Average-fixed-cost
question
Over what period of time can an industry and firms in that industry adjust all resource inputs used?
a) The short run
b) Both the long run and the short run
c) Neither the long run nor the short run.
d) The long run
d) The long run
question
A planning curve is another term for which of the following?
a) Long run average-variable-cost curve
b) Long run average-fixed-cost curve
c) Long run average-total-cost curve
d) Long run average-marginal-cost curve
c) Long run average-total-cost curve
question
What type of cost can be saved by not producing the last unit?
a) Average fixed
b) Total
c) Fixed
d) Marginal
d) Marginal
question
A firm's decision about what output level to produce is typically a ______ decision.
a) coordinated
b) marginal
c) sequential
d) production
b) marginal
question
What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?
a) The average-variable-cost and average-total-cost curves shift upward, and the marginal-cost curve shifts downward.
b) The average-variable-cost, average-total-cost, and marginal-cost curves shift downward.
c) The average-fixed-cost curve remains the same.
d) The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
c) The average-fixed-cost curve remains the same.
d) The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.

why?
Labor is a variable output, and doesn't affect fixed costs.
question
In the ____ run, firms are able to adjust all resources.
long
question
Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?
a) In the short run all resources and inputs are fixed.
b) In the long run all resources and inputs are variable.
c) In the short run all resources and inputs are variable.
d) In the long run all resources and inputs are fixed.
b) In the long run all resources and inputs are variable.
question
What does the long-run average-total-cost curve show?
a) The maximum level of output possible in the short run at all plant sizes
b) The lowest minimum short-run average-total-cost curve at which a firm must produce to make a profit
c) The sum total of all of the short-run average-total-cost curves
d) 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
d) 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
Economies of scale explain the downward-sloping part of the ______ curve.
a) long-run average-total-cost
b) long-run average-fixed-cost
c) short-run average-variable-cost
d) short-run average-total-cost
a) long-run average-total-cost
question
Which of the following is an example of labor specialization?
* Assigning each worker five or six unique tasks
* Hiring more workers in order to subdivide tasks
* Hiring fewer workers and creating fewer job classifications
* Hiring more workers in order to subdivide tasks
question
A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?
Marginal data.
question
How does labor specialization allow a worker to become more proficient?
a) It allows a worker to focus on more tasks to become a jack-of-all-trades.
b) It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.
c) It refers to the process developed by unions to protect both businesses and workers from inefficient production technology.
d) It increases the number of unskilled tasks a worker is able to perform.
b) It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.
question
The U-shape of the long-run average-total-cost curve results from which of the following?
* Fixed labor costs
* Economies of scale
* Rising resource prices
* Diseconomies of scale
* Economies of scale
* Diseconomies of scale
question
A marketing supervisor works in a small plant where she performs a range of duties. As the company grows and hires additional supervisors, she is able to spend the bulk of her time in her area of expertise. In this example, the company has increased its ______.
a) efficient capital
b) diseconomies of scale
c) division of labor
d) managerial specialization
d) managerial specialization
question
What is another term for economies of scale?
a) Diseconomies of mass production
b) Economies of mass production
c) Economies of output
d) Diseconomies of scale
b) Economies of mass production
question
Learning by doing contributes to a firm's ______.
a) diseconomies of scale
b) economies of scale
c) fixed costs
d) constant returns to scale
b) economies of scale
question
Increased labor ______ becomes more achievable as a plant increases in size.
a) generalization
b) supply
c) specialization
d) demand
c) specialization
question
Which of the following sections of a long-run average total cost curve depicts constant returns to scale?
a) The upward-sloping section
b) The downward-sloping section
c) The beginning high point of the curve
d) The flat section
d) The flat section

why?
this is the range that long-run average cost doesn't change
question
Greater labor specialization has which of the following effects?
a) It increases production costs.
b) It permits workers to specialize in more varied areas, so they do not get bored.
c) It allows workers to focus on more tasks rather than fewer.
d) It eliminates the loss of time that occurs whenever a worker shifts from one task to another.
d) It eliminates the loss of time that occurs whenever a worker shifts from one task to another.
question
The lowest level of output at which a firm can minimize long-run average costs is called ______.
a) minimum efficient scale
b) economies of scale
c) maximum efficient scale
d) diseconomies of scale
a) minimum efficient scale
question
Start-up firms achieve ____ of scale from learning by doing and through increased specialization of labor, management, and equipment.
economies
question
Which of the following result from managerial specialization?
* Decreased productivity
* Higher unit costs
* Greater efficiency
* Lower unit costs
* Greater efficiency
* Lower unit costs
question
A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?
a) Slow decision making
b) Labor specialization
c) Efficient capital
d) Learning by doing
d) Learning by doing
question
Which of the following illustrates constant returns to scale?
a) A firm's 10% increase in given inputs, causing a 30% increase in output
b) A firm's 10% increase in given inputs, causing a proportionate 10% increase in output
c) A firm's 10% increase in given inputs, causing a 5% increase in output
d) A firm's 10% increase in given inputs, causing a 20% increase in output
b) A firm's 10% increase in given inputs, causing a proportionate 10% increase in output
question
True or false: Important determinants of an industry's structure are economies of scale and revenue.
False.

why?
Important determinants of an industry's structure are economies and diseconomies of scale.
question
By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?
Downward and to the right.
question
Learning by doing contributes to a firm's ______.
a) diseconomies of scale
b) fixed costs
c) economies of scale
d) constant returns to scale
c) economies of scale
question
What three countries were originally the ones involved in NAFTA?
The North American countries:
- U.S.
- Mexico

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