Microecon 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

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

answer

explicit

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

The size of the factory, the amount of machinery and equipment, and other capital resources define _____ _____ .

answer

plant capacity
operational capacity
operation capacity

plant size
operational size
operation size

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

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

answer

Plant capacity

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

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

answer

True

question

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

answer

$120,000

economic profit = total revenue - economic cost

question

What are the components of plant capacity?

answer

Amount of machinery and equipment
Size of the factory building

question

Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

answer

Size of factory
Amount of machinery

question

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

answer

Total product

question

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

answer

Raw materials
Hourly labor
Fuel

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

When total product declines, marginal product ______.

answer

is negative

question

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

answer

Marginal product is positive but falling.

question

Which industry requires the most time for its firms to alter plant capacity?

answer

Aircraft manufacturing

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

What is the definition of total product (TP)?

answer

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

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

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

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

answer

Marginal product is rising.

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

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

Which costs do not vary with changes in output?

answer

Fixed

question

A firm cannot avoid paying fixed costs in the _____ run

answer

short

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

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

answer

Material costs
Fuel costs
Transportation services payments

question

Variable costs change with the level of _____

answer

output

question

A firm's insurance premiums are generally considered _____ costs.

answer

fixed

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

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

answer

They remain unchanged.

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

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

answer

Payments for materials, fuel, power, and transportation services

question

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

answer

As production increases, average fixed cost declines.

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

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

answer

amount of output

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

question

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

answer

$26

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

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

answer

Total

question

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

answer

$10

question

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

answer

Average fixed cost declines as output increases.

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

How is average fixed cost determined?

answer

Total fixed cost divided by 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 total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

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

answer

$10

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

$75

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

adding average fixed cost (AFC) and average variable cost (AVC) at that output.

dividing total cost (TC) by that output (Q).

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

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

answer

Marginal cost

question

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

answer

$25

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

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

answer

It is U-shaped.

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

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

How is marginal cost (MC) calculated?

answer

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

question

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

answer

marginal

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

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

When is marginal cost at its minimum?

answer

When marginal product is at its maximum

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

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

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

answer

Marginal

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

Which of the following is true of a firm?

answer

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

question

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

answer

diminishing

question

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

answer

marginal-cost

question

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

answer

Average-fixed-cost

question

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

answer

long

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

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

What is another term for economies of scale?

answer

Economies of mass production

question

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

answer

specialization

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

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

answer

Long run average-total-cost curve

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

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

answer

long-run average-total-cost

question

Which of the following result from managerial specialization?

answer

Greater efficiency

Lower unit costs

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

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

Learning by doing contributes to a firm's ______.

answer

economies of scale

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

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

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 illustrates constant returns to scale?

answer

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

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

Reason:
Important determinants of an industry's structure are economies and diseconomies of scale.

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

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

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

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

answer

minimum efficient scale

question

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

answer

The flat section

question

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

answer

economies

question

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

answer

minimum efficient scale

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

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

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

1 of 105

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

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

answer

explicit

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

The size of the factory, the amount of machinery and equipment, and other capital resources define _____ _____ .

answer

plant capacity
operational capacity
operation capacity

plant size
operational size
operation size

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

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

answer

Plant capacity

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

answer

$90,000

question

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

answer

True

question

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

answer

$120,000

economic profit = total revenue - economic cost

question

What are the components of plant capacity?

answer

Amount of machinery and equipment
Size of the factory building

question

Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

answer

Size of factory
Amount of machinery

question

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

answer

Total product

question

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

answer

Raw materials
Hourly labor
Fuel

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

When total product declines, marginal product ______.

answer

is negative

question

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

answer

Marginal product is positive but falling.

question

Which industry requires the most time for its firms to alter plant capacity?

answer

Aircraft manufacturing

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

What is the definition of total product (TP)?

answer

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

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

answer

diminishing returns

question

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

answer

zero

question

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

answer

Marginal product is rising.

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

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

Which costs do not vary with changes in output?

answer

Fixed

question

A firm cannot avoid paying fixed costs in the _____ run

answer

short

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

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

answer

Material costs
Fuel costs
Transportation services payments

question

Variable costs change with the level of _____

answer

output

question

A firm's insurance premiums are generally considered _____ costs.

answer

fixed

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

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

answer

They remain unchanged.

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

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

answer

Payments for materials, fuel, power, and transportation services

question

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

answer

As production increases, average fixed cost declines.

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

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

answer

amount of output

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

question

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

answer

$26

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

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

answer

Total

question

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

answer

$10

question

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

answer

Average fixed cost declines as output increases.

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

How is average fixed cost determined?

answer

Total fixed cost divided by 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 total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

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

answer

$10

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

$75

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

adding average fixed cost (AFC) and average variable cost (AVC) at that output.

dividing total cost (TC) by that output (Q).

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

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

answer

Marginal cost

question

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

answer

$25

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

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

answer

It is U-shaped.

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

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

How is marginal cost (MC) calculated?

answer

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

question

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

answer

marginal

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

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

When is marginal cost at its minimum?

answer

When marginal product is at its maximum

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

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

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

answer

Marginal

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

Which of the following is true of a firm?

answer

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

question

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

answer

diminishing

question

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

answer

marginal-cost

question

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

answer

Average-fixed-cost

question

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

answer

long

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

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

What is another term for economies of scale?

answer

Economies of mass production

question

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

answer

specialization

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

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

answer

Long run average-total-cost curve

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

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

answer

long-run average-total-cost

question

Which of the following result from managerial specialization?

answer

Greater efficiency

Lower unit costs

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

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

Learning by doing contributes to a firm's ______.

answer

economies of scale

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

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

answer

managerial specialization

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

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

Reason:
Important determinants of an industry's structure are economies and diseconomies of scale.

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

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

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

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

answer

minimum efficient scale

question

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

answer

The flat section

question

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

answer

economies

question

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

answer

minimum efficient scale

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

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

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

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Microecon Ch 9

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