econ exam 3 (unit 9)

question

economic costs

answer

the costs associated with the use of resources; the sum of explicit and implicit costs

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explicit costs

answer

monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial ability owned by others (ex: employees' wages)

question

implicit costs

answer

the opportunity costs of using owned resources; costs for which no monetary payment is explicitly made

question

accounting profit

answer

total revenue minus the explicit costs of production

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economic profit

answer

total revenue minus economic costs, which include both explicit and implicit costs of production

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short run

answer

the time period in which at least one input of production is fixed but other inputs can be changed

question

marginal product

answer

the additional output produced as a result of utilizing one more unit of a variable resource (change in total product over change in variable resource)

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average product

answer

the average amount of output produced per unit of a resource employed; total product divided by the number of units of a resource employed

question

increasing marginal returns

answer

a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource

question

diminishing marginal returns

answer

a characteristic of production whereby the marginal product of the next unit of variable resource utilized is less than that of the previous variable resource

question

fixed costs

answer

costs that do not change with the amount of output produced

question

variable costs

answer

costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases

question

total cost

answer

total fixed cost TFC + total variable cost TVC

question

total cost graph

answer

total fixed cost (TFC) divided by the amount of output produced; fixed cost per unit

question

Average Fixed Cost (AFC)

answer

total variable cost (TVC) divided by the amount of output produced; variable cost per unit

question

Average Variable Cost (AVC)

answer

total cost divided by the amount of output produced; total cost per unit

question

Average Total Cost (ATC)

answer

change in total cost divided by the change in output

question

average total cost curve

answer

ATC increases

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marginal cost

answer

AVC increases

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If MC> ATC,

answer

ATC decreases

question

If MC> AVC,

answer

AVC decreases

question

If MC< ATC,

answer

then avc remains unchanged

question

If MC < AVC

answer

a curve showing the average total cost for different levels of output when at least one input of production is fixed, typically plant capacity

question

if mc= avc

answer

the time period in which all inputs of production can be changed

question

short run average total cost curve (ATC)

answer

a curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable

question

long run

answer

a condition in which the long-run average total costs of production decreases as production increases

question

long run average total cost curve (LRATC)

answer

a condition in which the long-run average total cost of production increases as production increases

question

economies of scale

answer

a condition in which the long-run average total cost of production remains constant as production increases

question

diseconomies of scale

answer

the lowest level of output at which the long-run average total cost is minimized

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constant returns to scale

answer

the average variable cost curve lies below the average total cost curve

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minimum efficiency scale

answer

explicit costs

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average variable cost on graph

answer

fuel and power payments

question

monetary payments a firm makes to pay for resources are called

answer

$21,000

question

which of the following is most likely to be a variable cost of production in the short run

answer

baking supplies (flour, salt, etc.)

question

The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of $78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates it would have returned $22,000 this year. What is the sole proprietor's economic profit?

answer

$220,000

question

Assume that you are the owner of a small bakery in your hometown. Which of the following would be a variable cost of production in the short run?

answer

$94.

question

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

What is the economic profit generated by Extreme Gaming in the first year?

answer

average product of labor.

question

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

answer

diminishing marginal returns.

question

When a bakery manager reports that productivity of the 15 workers at her bakery last month was 1,800 loaves per worker, she is referring to the

answer

productivity gains from more specialized labor

question

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

answer

diseconomies of scale.

question

Which factor could contribute to a firm experiencing economies of scale?

answer

explicit costs.

question

If the total cost of production increases by 10 percent and output increases by less than 5 percent, then the firm is experiencing

answer

$60,000.

question

Accounting profit equals total revenue minus

answer

undefined

question

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The implicit costs of Harvey's firm in the first year were

answer

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1 of 44

question

economic costs

answer

the costs associated with the use of resources; the sum of explicit and implicit costs

question

explicit costs

answer

monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial ability owned by others (ex: employees' wages)

question

implicit costs

answer

the opportunity costs of using owned resources; costs for which no monetary payment is explicitly made

question

accounting profit

answer

total revenue minus the explicit costs of production

question

economic profit

answer

total revenue minus economic costs, which include both explicit and implicit costs of production

question

short run

answer

the time period in which at least one input of production is fixed but other inputs can be changed

question

marginal product

answer

the additional output produced as a result of utilizing one more unit of a variable resource (change in total product over change in variable resource)

question

average product

answer

the average amount of output produced per unit of a resource employed; total product divided by the number of units of a resource employed

question

increasing marginal returns

answer

a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource

question

diminishing marginal returns

answer

a characteristic of production whereby the marginal product of the next unit of variable resource utilized is less than that of the previous variable resource

question

fixed costs

answer

costs that do not change with the amount of output produced

question

variable costs

answer

costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases

question

total cost

answer

total fixed cost TFC + total variable cost TVC

question

total cost graph

answer

total fixed cost (TFC) divided by the amount of output produced; fixed cost per unit

question

Average Fixed Cost (AFC)

answer

total variable cost (TVC) divided by the amount of output produced; variable cost per unit

question

Average Variable Cost (AVC)

answer

total cost divided by the amount of output produced; total cost per unit

question

Average Total Cost (ATC)

answer

change in total cost divided by the change in output

question

average total cost curve

answer

ATC increases

question

marginal cost

answer

AVC increases

question

If MC> ATC,

answer

ATC decreases

question

If MC> AVC,

answer

AVC decreases

question

If MC< ATC,

answer

then avc remains unchanged

question

If MC < AVC

answer

a curve showing the average total cost for different levels of output when at least one input of production is fixed, typically plant capacity

question

if mc= avc

answer

the time period in which all inputs of production can be changed

question

short run average total cost curve (ATC)

answer

a curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable

question

long run

answer

a condition in which the long-run average total costs of production decreases as production increases

question

long run average total cost curve (LRATC)

answer

a condition in which the long-run average total cost of production increases as production increases

question

economies of scale

answer

a condition in which the long-run average total cost of production remains constant as production increases

question

diseconomies of scale

answer

the lowest level of output at which the long-run average total cost is minimized

question

constant returns to scale

answer

the average variable cost curve lies below the average total cost curve

question

minimum efficiency scale

answer

explicit costs

question

average variable cost on graph

answer

fuel and power payments

question

monetary payments a firm makes to pay for resources are called

answer

$21,000

question

which of the following is most likely to be a variable cost of production in the short run

answer

baking supplies (flour, salt, etc.)

question

answer

$220,000

question

Assume that you are the owner of a small bakery in your hometown. Which of the following would be a variable cost of production in the short run?

answer

$94.

question

answer

average product of labor.

question

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

answer

diminishing marginal returns.

question

When a bakery manager reports that productivity of the 15 workers at her bakery last month was 1,800 loaves per worker, she is referring to the

answer

productivity gains from more specialized labor

question

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

answer

diseconomies of scale.

question

Which factor could contribute to a firm experiencing economies of scale?

answer

explicit costs.

question

If the total cost of production increases by 10 percent and output increases by less than 5 percent, then the firm is experiencing

answer

$60,000.

question

Accounting profit equals total revenue minus

answer

undefined

question

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The implicit costs of Harvey's firm in the first year were

answer

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econ exam 3 (unit 9)

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