econ ch. 9

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.

answer

economic

question

When a firm considers its economic costs, it considers which of the following?

answer

All opportunity costs of resources used
Explicit and implicit costs

question

Total costs equal explicit costs plus implicit costs.

answer

economic

question

Which of the following would incur an explicit cost?

answer

Labor services
Utility usage
Raw materials

question

costs are the monetary payments a firm makes to purchase resources from others.

answer

explicit

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

True or false: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

true

question

A firm's costs are the explicit and implicit costs of the resources it has used.

answer

economic

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

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

false

question

A firm's monetary payments to those who supply transportation services is an example of ______.

answer

explicit costs

question

Generally speaking, there are two types of calculable profits. Of these, profit is what remains after a firm has paid its explicit costs.

answer

accounting

question

Which of the following explain the concept of explicit costs? (Check all that apply.)

answer

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

question

Which of the following are examples of implicit costs?

answer

Forgone rent
Forgone wages

question

What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?

answer

Implicit

question

Determining normal profit involves estimating which of the following?

answer

Forgone entrepreneurial income

question

Accounting profit is what remains after a firm has paid its _______ costs.

answer

explicit

question

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

answer

24,000

question

total costs equal explicit costs plus implicit costs.

answer

economic

question

A(n) ______ profit is equal to total revenue less explicit costs.

answer

accounting

question

What is the difference between accounting profit and economic profit?

answer

Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit).

question

Forgone entrepreneurial income is an example of a(n) ______.

answer

implicit cost

question

When total revenue earned by an entrepreneur is equal to the sum of explicit and implicit costs, then the entrepreneur earns a(n) ______.

answer

zero economic profit

question

Subtracting implicit costs from accounting profit yields which of the following?

answer

Economic profit

question

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

answer

$120,000

question

What is the definition of economic profit?

answer

Total revenue minus economic costs (explicit and implicit)

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

false

question

profit is the firm's total revenue less its explicit costs, whereas profit is the firm's total revenue less economic costs (explicit and implicit).

answer

accounting ,economic

question

What does it mean to the entrepreneur when economic profit is zero?

answer

plant, capacity

question

Determining normal profit involves estimating which of the following?

answer

Aircraft manufacturing

question

Subtracting explicit and implicit costs from total revenue yields which of the following?

answer

Economic profit

question

Total costs equal explicit costs plus implicit costs

answer

economic

question

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

answer

true

question

What are the components of plant capacity?

answer

Size of the factory building
Amount of machinery and equipment

question

In the short run, if a firm wants to vary its output, what resources can it adjust?

answer

Labor
Materials

question

Which resource requires the most time for a firm to adjust, given a change in demand?

answer

Plant capacity

question

From the industry's viewpoint, the run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry.

answer

long

question

Which of the following illustrate the concept of a short-run adjustment?

answer

Boeing adds an entire shift of workers.
Boeing hires 100 extra workers for one of its commercial airline plants.

question

Which of the following resources can a firm easily and quickly adjust?

answer

Hourly labor
Fuel
Raw materials

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

true

question

What is the definition of total product (TP)?

answer

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

question

Which of the following is true regarding a firm's plant capacity?

answer

It is fixed in the short run.

question

A company has three workers. It adds an additional laborer and its total product increases by 21. What is the company's marginal product?

answer

question

In microeconomics, the long run is also known as which of the following?

answer

Variable-plant period

question

product is the change in total product divided by the change in labor input.

answer

marginal

question

A company hiring an entire shift of workers is an example of a(n) -run adjustment, whereas installing new equipment is an example of a(n) -run adjustment.

answer

short,long

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

Which of the following are examples of a long-run adjustment period?

answer

The three years it takes an oil refining company to build a new plant
The two days it takes a t-shirt maker to add sewing machines and silk-screen printers

question

What is the term for the total quantity of a specific good produced?

answer

total product

question

Which best describes average product (AP)?

answer

output per unit of labor input

question

If the change in total product is 10 units and the change in labor input is 1, what is marginal product?

answer

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.

answer

Diminishing

question

How is marginal product (MP) defined?

answer

The extra output or added product associated with adding a unit of a variable resource

question

Which costs do not vary with changes in output?

answer

fixed

question

If total product is 50 and the units of labor used is 10, then the average product is

answer

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

true

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

Which is another term for average product?

answer

labor productivity

question

Marginal product is the slope of the ______ curve.

answer

total product

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

When total product is at its maximum, marginal product is ______.

answer

zero

question

In a manufacturing plant with no labor, adding labor increases output and marginal product. However, at some point increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline, because there will simply not be enough space for so many workers to work. This is an example of the law of

answer

diminishing

question

What happens to marginal product when total product is increasing at an increasing rate?

answer

Marginal product is rising.

question

The law of diminishing returns assumes that ______.

answer

all units of labor input are of equal quality

question

Total product goes through three phases: It initially at an increasing rate; then it increases but at a diminishing rate; finally, after reaching a maximum, it

answer

rises,falls

question

What happens to average product as additional units of labor are added to a fixed plant?

answer

It increases, reaches a maximum, and then decreases.

question

When total product declines, marginal product ______.

answer

is negative

question

Which of the following is true where the marginal product curve intersects the average product curve?

answer

Average product is at its maximum.

question

A farmer cultivates a cornfield by fertilizing and increases the farm's yield to 50 bushels per acre. Additional cultivation increases the yield but at a decreasing rate. At some point, additional cultivation will not lead to any additional output per acre. This is an example of the law of ______.

answer

diminishing returns

question

What happens to marginal product when total product is increasing but at a decreasing rate?

answer

Marginal product is positive but falling.

question

a firm's insurance premiums are generally considered costs.

answer

fixed

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

A firm cannot avoid paying fixed costs in the run

answer

short

question

Average product declines when ______.

answer

marginal product is less than average product

question

Which of the following are examples of variable costs? (Check all that apply.)

answer

Fuel costs
Materials costs
Transportation services payments

question

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

answer

fixed

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

Which of the following are examples of fixed costs?

answer

Interest on a firm's debts
Rental payments

question

What happens to fixed costs when the level of production output reaches zero?

answer

they remained unchanged

question

Which group of costs is the most accurate example of variable cost?

answer

Payments for materials, fuel, power, and transportation services

question

Variable costs change with the level of

answer

output

question

When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?

answer

$125

question

Later in a production cycle, as diminishing returns are encountered, variable costs ______ for each additional unit of output.

answer

increase by increasing amounts

question

A firm's insurance premiums are generally considered costs.

answer

fixed

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

At the point on a graph where total product (Q) is zero, total cost is equal to ______.

answer

total fixed cost

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

cost is the sum of fixed cost and variable cost at each level of output.

answer

total

question

How can a business manager control variable costs in the short run?

answer

By altering levels of production

question

When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis.

answer

verticALLY

question

Per-unit costs are also referred to as ______ costs.

answer

average

question

Which of the following is true of average fixed cost when output increases?

answer

Average fixed cost declines as output increases.

question

Average fixed cost equals total fixed cost divided by the ______.

answer

amount of output

question

In the short run, a business manager is unable to alter which of the following?

answer

fixed costs

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 ______.

answer

100

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

What is meant by the phrase "spreading the overhead"?

answer

As production increases, average fixed cost declines.

question

How is average fixed cost determined?

answer

Total fixed cost divided by output

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

What is the average fixed cost if total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

Which curve first falls and then rises?

answer

average variable cost curve

question

Which of the following statements explain why the average variable cost curve is U-shaped?

answer

At low levels of output, production is relatively inefficient and costly.
As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines.

question

Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average total cost of the firm is ______.

answer

question

What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?

answer

question

Which of the following sets of values are necessary to compute average total cost (ATC)?

answer

total cost and output
Average fixed cost and average variable cost
Total variable cost, total fixed cost, and output

question

Average variable cost equals total variable cost divided by total ______.

answer

output

question

Average total cost (ATC) for any output level Q is found by:

answer

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

question

Which of the following best describes the average variable cost curve?

answer

It is U-shaped.

question

One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines

answer

specialization

question

What is the average fixed cost if the average total cost is $100 and the average variable cost is $75?

answer

question

How is the average total cost curve determined from graphical information?

answer

By adding vertically the average fixed cost and average variable cost curves.

question

What is average total cost if total cost is $100, variable costs are $75, fixed costs are $25, and output is 25?

answer

question

Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?

answer

Average total cost

question

How is marginal cost (MC) calculated?

answer

By dividing the change in total cost by the change in output

question

Which curve first falls and then rises?

answer

average variable cost curve

question

If total cost rises from $300 to $700 when one additional unit of output is produced, what is the marginal cost?

answer

400

question

What does the vertical distance between the average total cost and average variable cost curves measure?

answer

Average fixed cost at any level of output

question

What is the term for the extra cost of producing one more unit of output?

answer

Marginal cost

question

Marginal cost includes which of the following?

answer

All the cost associated with producing the last unit of output
The cost savings resulting from not producing the last unit of output

question

What is the marginal cost when output changes from 300 to 301 units and total cost rises from $400 to $500?

answer

100

question

A firm's decision about what output level to produce is typically a ______ decision.

answer

marginal

question

Which best describes the graphical portrayal of marginal cost?

answer

The marginal cost curve declines sharply at first, reaches a minimum, and then rises abruptly.

question

If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.

answer

marginal product

question

When is marginal cost at its minimum?

answer

When marginal product is at its maximum

question

What type of cost can be saved by not producing the last unit?

answer

Marginal

question

Which of the following is true of a firm?

answer

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

question

The shape of the marginal cost curve reflects which of the following?

answer

Total variable cost first increases by decreasing amounts then by increasing amounts.

question

The marginal cost curve's shape is a consequence of the law of

answer

diminishing

question

Where does the marginal-cost curve intersect the average-total-cost curve?

answer

At the minimum point of average total cost

question

The marginal-product curve is a mirror image of the ______ curve.

answer

marginal-cost

question

The marginal-cost curve intersects with the average-variable-cost curve at the ______.

answer

average-variable-cost curve's minimum

question

Which of the following occur when fixed costs increase?

answer

The average total cost curve shifts upward.
The average fixed cost curve shifts upward.

question

An increase in the price of labor has no effect on which cost curve?

answer

Average-fixed-cost

question

What is the relationship between productivity (MP & AP) and cost (MC & AVC) curves?

answer

-as productivity curves are falling, cost curves are rising. -they are mirror reflections of each other
-as productivity curves are rising, cost curves are falling

question

More efficient technology has what effect on the productivity of all inputs?

answer

It increases the productivity of all inputs.

question

Average total cost goes up when marginal cost is greater than ______.

answer

average total cost

question

Identify a correct statement about an industry and its individual firms.

answer

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

question

How are marginal costs and average fixed costs related?

answer

They are not related.

question

Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

answer

The long run

question

Which of the following are likely to cause cost curves to shift?

answer

Changes in resource prices
Changes in technology

question

Which of the following are effects of an increase in the price of labor on the cost curves?

answer

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

question

The long-run average-total-cost curve is derived from the many short-run average-total-cost curves, each of which represents a different ______.

answer

plant size

question

In the run, firms are able to adjust all resources.

answer

LONG

question

Under the definition of long run, all resources and inputs are ______.

answer

variable

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

How is the long-run average-total-cost curve derived?

answer

From all points of tangency of the short-run average-total-cost curves

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

If a firm estimates that its level of output will be 40 units, it will most likely select the plant size depicted by which short-run cost curve in the accompanying figure?

answer

ATC -3

question

Economies of scale explain the downward-sloping part of the ______ curve.

answer

long-run average-total-cost

question

A planning curve is another term for which of the following?

answer

Long run average-total-cost curve

question

The smoothness of a long-run average-total-cost curve results from which of the following?

answer

The virtually unlimited number of available plant sizes

question

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

answer

Economies of scale
Diseconomies of scale

question

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

answer

specialization

question

What is another term for economies of scale?

answer

Economies of mass production

question

How does labor specialization allow a worker to become more proficient?

answer

It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.

question

Which businesses would allow for the greatest use of management specialization?

answer

An international airline
An automobile manufacturer

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 ______.

answer

managerial specialization

question

Which of the following is an example of labor specialization?

answer

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

question

What are reasons that it difficult for small firms to make use of efficient capital?

answer

The high price of production equipment is often prohibitive.
The efficient use of large-scale production equipment requires a high production volume.

question

Greater labor specialization has which of the following effects?

answer

It eliminates the loss of time that occurs whenever a worker shifts from one task to another.

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

Which of the following best describes the relationship between a firm's size and its ability to use managerial specialization to its best advantage?

answer

Small firms cannot use management specialists to their best advantage.

question

By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?

answer

Lower its average total costs

question

Which of the following result from managerial specialization?

answer

Greater efficiency
Lower unit costs

question

Which of the following best illustrates diseconomies of scale?

answer

The increase in average total costs as a firm expands the size of its plant in the long run

question

Less coordinated decision making by executives and supervisors leads to of scale

answer

diseconomies

question

In general, what production characteristic and plant size scale are required for efficient capital usage to be effective?

answer

Large-scale producers
High production volume

question

Which of the following sections of a long-run average total cost curve depicts constant returns to scale?

answer

The flat section

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?

answer

Learning by doing

question

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

answer

False

question

With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

answer

A decline in average total cost (ATC)

question

True or false: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

True

question

What is the primary cause of diseconomies of scale?

answer

The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer

question

Which of the following worker productivity factors often lead to diseconomies of scale?

answer

Worker alienation from the employer
Increased opportunities to shirk and avoid work

question

Which of the following illustrates constant returns to scale?

answer

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

question

Which of the following industries highlight the pattern of declining long-run average total costs?

answer

Computer microchip
Aluminum
Automobile

question

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

answer

minimum efficient scale

question

A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.

answer

natural monopoly

question

The figure illustrates that in an industry with an extended range of returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

constant

question

Which of the following occurs at a low level of output for small businesses such as those in retail trades and light manufacturing industries?

answer

Minimum efficient scale

question

The shape of a long-run average-total-cost curve will determine ______.

answer

The shape of a long-run average-total-cost curve will determine ______.

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

True or false: Heavy industries, such as aluminum and steel, exhibit the pattern of declining long-run average total costs.

answer

True

question

In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.

answer

minimum efficient scale

question

When minimum efficient scale occurs at a low level of output, consumer ______ may support a large number of relatively ______ producers.

answer

demand; small

question

What determines the shape of the long-run average-total-cost curve?

answer

Technology

question

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

answer

economies

question

The shape of a long-run average-total-cost curve will determine ______.

answer

...

1 of 191

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.

answer

economic

question

When a firm considers its economic costs, it considers which of the following?

answer

All opportunity costs of resources used
Explicit and implicit costs

question

Total costs equal explicit costs plus implicit costs.

answer

economic

question

Which of the following would incur an explicit cost?

answer

Labor services
Utility usage
Raw materials

question

costs are the monetary payments a firm makes to purchase resources from others.

answer

explicit

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

True or false: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

true

question

A firm's costs are the explicit and implicit costs of the resources it has used.

answer

economic

question

answer

$90,000

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

false

question

A firm's monetary payments to those who supply transportation services is an example of ______.

answer

explicit costs

question

Generally speaking, there are two types of calculable profits. Of these, profit is what remains after a firm has paid its explicit costs.

answer

accounting

question

Which of the following explain the concept of explicit costs? (Check all that apply.)

answer

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

question

Which of the following are examples of implicit costs?

answer

Forgone rent
Forgone wages

question

What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?

answer

Implicit

question

Determining normal profit involves estimating which of the following?

answer

Forgone entrepreneurial income

question

Accounting profit is what remains after a firm has paid its _______ costs.

answer

explicit

question

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

answer

24,000

question

total costs equal explicit costs plus implicit costs.

answer

economic

question

A(n) ______ profit is equal to total revenue less explicit costs.

answer

accounting

question

What is the difference between accounting profit and economic profit?

answer

Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit).

question

Forgone entrepreneurial income is an example of a(n) ______.

answer

implicit cost

question

When total revenue earned by an entrepreneur is equal to the sum of explicit and implicit costs, then the entrepreneur earns a(n) ______.

answer

zero economic profit

question

Subtracting implicit costs from accounting profit yields which of the following?

answer

Economic profit

question

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

answer

$120,000

question

What is the definition of economic profit?

answer

Total revenue minus economic costs (explicit and implicit)

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

false

question

profit is the firm's total revenue less its explicit costs, whereas profit is the firm's total revenue less economic costs (explicit and implicit).

answer

accounting ,economic

question

What does it mean to the entrepreneur when economic profit is zero?

answer

plant, capacity

question

Determining normal profit involves estimating which of the following?

answer

Aircraft manufacturing

question

Subtracting explicit and implicit costs from total revenue yields which of the following?

answer

Economic profit

question

Total costs equal explicit costs plus implicit costs

answer

economic

question

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

answer

true

question

What are the components of plant capacity?

answer

Size of the factory building
Amount of machinery and equipment

question

In the short run, if a firm wants to vary its output, what resources can it adjust?

answer

Labor
Materials

question

Which resource requires the most time for a firm to adjust, given a change in demand?

answer

Plant capacity

question

From the industry's viewpoint, the run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry.

answer

long

question

Which of the following illustrate the concept of a short-run adjustment?

answer

Boeing adds an entire shift of workers.
Boeing hires 100 extra workers for one of its commercial airline plants.

question

Which of the following resources can a firm easily and quickly adjust?

answer

Hourly labor
Fuel
Raw materials

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

true

question

What is the definition of total product (TP)?

answer

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

question

Which of the following is true regarding a firm's plant capacity?

answer

It is fixed in the short run.

question

A company has three workers. It adds an additional laborer and its total product increases by 21. What is the company's marginal product?

answer

question

In microeconomics, the long run is also known as which of the following?

answer

Variable-plant period

question

product is the change in total product divided by the change in labor input.

answer

marginal

question

A company hiring an entire shift of workers is an example of a(n) -run adjustment, whereas installing new equipment is an example of a(n) -run adjustment.

answer

short,long

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

Which of the following are examples of a long-run adjustment period?

answer

The three years it takes an oil refining company to build a new plant
The two days it takes a t-shirt maker to add sewing machines and silk-screen printers

question

What is the term for the total quantity of a specific good produced?

answer

total product

question

Which best describes average product (AP)?

answer

output per unit of labor input

question

If the change in total product is 10 units and the change in labor input is 1, what is marginal product?

answer

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.

answer

Diminishing

question

How is marginal product (MP) defined?

answer

The extra output or added product associated with adding a unit of a variable resource

question

Which costs do not vary with changes in output?

answer

fixed

question

If total product is 50 and the units of labor used is 10, then the average product is

answer

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

true

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

Which is another term for average product?

answer

labor productivity

question

Marginal product is the slope of the ______ curve.

answer

total product

question

answer

diminishing returns

question

When total product is at its maximum, marginal product is ______.

answer

zero

question

answer

diminishing

question

What happens to marginal product when total product is increasing at an increasing rate?

answer

Marginal product is rising.

question

The law of diminishing returns assumes that ______.

answer

all units of labor input are of equal quality

question

Total product goes through three phases: It initially at an increasing rate; then it increases but at a diminishing rate; finally, after reaching a maximum, it

answer

rises,falls

question

What happens to average product as additional units of labor are added to a fixed plant?

answer

It increases, reaches a maximum, and then decreases.

question

When total product declines, marginal product ______.

answer

is negative

question

Which of the following is true where the marginal product curve intersects the average product curve?

answer

Average product is at its maximum.

question

answer

diminishing returns

question

What happens to marginal product when total product is increasing but at a decreasing rate?

answer

Marginal product is positive but falling.

question

a firm's insurance premiums are generally considered costs.

answer

fixed

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

A firm cannot avoid paying fixed costs in the run

answer

short

question

Average product declines when ______.

answer

marginal product is less than average product

question

Which of the following are examples of variable costs? (Check all that apply.)

answer

Fuel costs
Materials costs
Transportation services payments

question

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

answer

fixed

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

Which of the following are examples of fixed costs?

answer

Interest on a firm's debts
Rental payments

question

What happens to fixed costs when the level of production output reaches zero?

answer

they remained unchanged

question

Which group of costs is the most accurate example of variable cost?

answer

Payments for materials, fuel, power, and transportation services

question

Variable costs change with the level of

answer

output

question

When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?

answer

$125

question

Later in a production cycle, as diminishing returns are encountered, variable costs ______ for each additional unit of output.

answer

increase by increasing amounts

question

A firm's insurance premiums are generally considered costs.

answer

fixed

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

At the point on a graph where total product (Q) is zero, total cost is equal to ______.

answer

total fixed cost

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

cost is the sum of fixed cost and variable cost at each level of output.

answer

total

question

How can a business manager control variable costs in the short run?

answer

By altering levels of production

question

When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis.

answer

verticALLY

question

Per-unit costs are also referred to as ______ costs.

answer

average

question

Which of the following is true of average fixed cost when output increases?

answer

Average fixed cost declines as output increases.

question

Average fixed cost equals total fixed cost divided by the ______.

answer

amount of output

question

In the short run, a business manager is unable to alter which of the following?

answer

fixed costs

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 ______.

answer

100

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

What is meant by the phrase "spreading the overhead"?

answer

As production increases, average fixed cost declines.

question

How is average fixed cost determined?

answer

Total fixed cost divided by output

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

What is the average fixed cost if total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

Which curve first falls and then rises?

answer

average variable cost curve

question

Which of the following statements explain why the average variable cost curve is U-shaped?

answer

At low levels of output, production is relatively inefficient and costly.
As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines.

question

Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average total cost of the firm is ______.

answer

question

What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?

answer

question

Which of the following sets of values are necessary to compute average total cost (ATC)?

answer

total cost and output
Average fixed cost and average variable cost
Total variable cost, total fixed cost, and output

question

Average variable cost equals total variable cost divided by total ______.

answer

output

question

Average total cost (ATC) for any output level Q is found by:

answer

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

question

Which of the following best describes the average variable cost curve?

answer

It is U-shaped.

question

One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines

answer

specialization

question

What is the average fixed cost if the average total cost is $100 and the average variable cost is $75?

answer

question

How is the average total cost curve determined from graphical information?

answer

By adding vertically the average fixed cost and average variable cost curves.

question

What is average total cost if total cost is $100, variable costs are $75, fixed costs are $25, and output is 25?

answer

question

Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?

answer

Average total cost

question

How is marginal cost (MC) calculated?

answer

By dividing the change in total cost by the change in output

question

Which curve first falls and then rises?

answer

average variable cost curve

question

If total cost rises from $300 to $700 when one additional unit of output is produced, what is the marginal cost?

answer

400

question

What does the vertical distance between the average total cost and average variable cost curves measure?

answer

Average fixed cost at any level of output

question

What is the term for the extra cost of producing one more unit of output?

answer

Marginal cost

question

Marginal cost includes which of the following?

answer

All the cost associated with producing the last unit of output
The cost savings resulting from not producing the last unit of output

question

What is the marginal cost when output changes from 300 to 301 units and total cost rises from $400 to $500?

answer

100

question

A firm's decision about what output level to produce is typically a ______ decision.

answer

marginal

question

Which best describes the graphical portrayal of marginal cost?

answer

The marginal cost curve declines sharply at first, reaches a minimum, and then rises abruptly.

question

If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.

answer

marginal product

question

When is marginal cost at its minimum?

answer

When marginal product is at its maximum

question

What type of cost can be saved by not producing the last unit?

answer

Marginal

question

Which of the following is true of a firm?

answer

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

question

The shape of the marginal cost curve reflects which of the following?

answer

Total variable cost first increases by decreasing amounts then by increasing amounts.

question

The marginal cost curve's shape is a consequence of the law of

answer

diminishing

question

Where does the marginal-cost curve intersect the average-total-cost curve?

answer

At the minimum point of average total cost

question

The marginal-product curve is a mirror image of the ______ curve.

answer

marginal-cost

question

The marginal-cost curve intersects with the average-variable-cost curve at the ______.

answer

average-variable-cost curve's minimum

question

Which of the following occur when fixed costs increase?

answer

The average total cost curve shifts upward.
The average fixed cost curve shifts upward.

question

An increase in the price of labor has no effect on which cost curve?

answer

Average-fixed-cost

question

What is the relationship between productivity (MP & AP) and cost (MC & AVC) curves?

answer

-as productivity curves are falling, cost curves are rising. -they are mirror reflections of each other
-as productivity curves are rising, cost curves are falling

question

More efficient technology has what effect on the productivity of all inputs?

answer

It increases the productivity of all inputs.

question

Average total cost goes up when marginal cost is greater than ______.

answer

average total cost

question

Identify a correct statement about an industry and its individual firms.

answer

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

question

How are marginal costs and average fixed costs related?

answer

They are not related.

question

Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

answer

The long run

question

Which of the following are likely to cause cost curves to shift?

answer

Changes in resource prices
Changes in technology

question

Which of the following are effects of an increase in the price of labor on the cost curves?

answer

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

question

The long-run average-total-cost curve is derived from the many short-run average-total-cost curves, each of which represents a different ______.

answer

plant size

question

In the run, firms are able to adjust all resources.

answer

LONG

question

Under the definition of long run, all resources and inputs are ______.

answer

variable

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

How is the long-run average-total-cost curve derived?

answer

From all points of tangency of the short-run average-total-cost curves

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

If a firm estimates that its level of output will be 40 units, it will most likely select the plant size depicted by which short-run cost curve in the accompanying figure?

answer

ATC -3

question

Economies of scale explain the downward-sloping part of the ______ curve.

answer

long-run average-total-cost

question

A planning curve is another term for which of the following?

answer

Long run average-total-cost curve

question

The smoothness of a long-run average-total-cost curve results from which of the following?

answer

The virtually unlimited number of available plant sizes

question

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

answer

Economies of scale
Diseconomies of scale

question

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

answer

specialization

question

What is another term for economies of scale?

answer

Economies of mass production

question

How does labor specialization allow a worker to become more proficient?

answer

It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.

question

Which businesses would allow for the greatest use of management specialization?

answer

An international airline
An automobile manufacturer

question

answer

managerial specialization

question

Which of the following is an example of labor specialization?

answer

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

question

What are reasons that it difficult for small firms to make use of efficient capital?

answer

The high price of production equipment is often prohibitive.
The efficient use of large-scale production equipment requires a high production volume.

question

Greater labor specialization has which of the following effects?

answer

It eliminates the loss of time that occurs whenever a worker shifts from one task to another.

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

Which of the following best describes the relationship between a firm's size and its ability to use managerial specialization to its best advantage?

answer

Small firms cannot use management specialists to their best advantage.

question

By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?

answer

Lower its average total costs

question

Which of the following result from managerial specialization?

answer

Greater efficiency
Lower unit costs

question

Which of the following best illustrates diseconomies of scale?

answer

The increase in average total costs as a firm expands the size of its plant in the long run

question

Less coordinated decision making by executives and supervisors leads to of scale

answer

diseconomies

question

In general, what production characteristic and plant size scale are required for efficient capital usage to be effective?

answer

Large-scale producers
High production volume

question

Which of the following sections of a long-run average total cost curve depicts constant returns to scale?

answer

The flat section

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?

answer

Learning by doing

question

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

answer

False

question

With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

answer

A decline in average total cost (ATC)

question

True or false: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

True

question

What is the primary cause of diseconomies of scale?

answer

The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer

question

Which of the following worker productivity factors often lead to diseconomies of scale?

answer

Worker alienation from the employer
Increased opportunities to shirk and avoid work

question

Which of the following illustrates constant returns to scale?

answer

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

question

Which of the following industries highlight the pattern of declining long-run average total costs?

answer

Computer microchip
Aluminum
Automobile

question

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

answer

minimum efficient scale

question

A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.

answer

natural monopoly

question

The figure illustrates that in an industry with an extended range of returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

constant

question

Which of the following occurs at a low level of output for small businesses such as those in retail trades and light manufacturing industries?

answer

Minimum efficient scale

question

The shape of a long-run average-total-cost curve will determine ______.

answer

The shape of a long-run average-total-cost curve will determine ______.

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

True or false: Heavy industries, such as aluminum and steel, exhibit the pattern of declining long-run average total costs.

answer

True

question

In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.

answer

minimum efficient scale

question

When minimum efficient scale occurs at a low level of output, consumer ______ may support a large number of relatively ______ producers.

answer

demand; small

question

What determines the shape of the long-run average-total-cost curve?

answer

Technology

question

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

answer

economies

question

The shape of a long-run average-total-cost curve will determine ______.

answer

...

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econ ch. 9

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