chapter 11

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The​ short-run average cost can never be less the​ long-run average costs because

in the long​ run, all inputs are adjusted including the ones that are fixed in the short run.

Which of the following are examples of a firm experiencing positive technological​ change? a. A firm is able to cut each​ worker's wage rate by 10 percent and still produce the same level of output. This ____ an example of positive technological change. b. A training program makes a​ firm's workers more productive. This ___ an example of positive technological change. C. An exercise program makes a​ firm's workers more healthy and productive. This ___ not an example of positive technological change. d. A firm cuts its workforce and is able to maintain its initial level of output. This ____ an example of positive technological change. e. A firm rearranges the layout of its factory and finds that by using its initial set of​ inputs, it can produce exactly as much as before. This ____ an example of positive technological change.

is not is is is is not

The marginal cost curve intersects both the average variable cost and the average total cost curves at their ____ points.

minimum

What is minimum efficient​ scale? Minimum efficient scale is What is likely to happen in the long run to firms that do not reach minimum efficient​ scale? A firm that does not reach its minimum efficient scale

the level of output at which the long−run average cost of production no longer decreases with output. will lose money if it remains in business.

What is the difference between total cost and variable cost in the long​ run? In the long​ run,

the total cost of production equals the variable cost of production. Your answer is correct. D.

Economies of scale occur For which of the following​ reason(s) may firms experience economies of​ scale?

when a​ firm's long-run average costs decrease with output. Both managers and workers may become more specialized and hence more productive as output expands. Large firms may be able to purchase inputs at lower costs than smaller​ competitors; they can also borrow money at a lower interest rate. ​Firm's production may increase with a smaller proportional increase in at least one input. All of the above.

What are diseconomies of​ scale? Diseconomies of scale is What is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or​ factory?

when a​ firm's long-run average costs increase with output Firms have difficulty coordinating production.

Explain why the marginal cost curve intersects the average variable cost curve at the level of output where average variable cost is at a minimum. The marginal cost curve intersects the average variable cost curve at the level of output where average variable cost is at a minimum because

when the marginal cost of the last unit produced is below the​ average, it pulls the average​ down, and when the marginal cost is above the​ average, it pulls the average up

Sally looks at her college transcript and says to​ you, ​"How is this​ possible? My grade point average​ (GPA) for this​ semester's courses is higher than my GPA for last​ semester's courses, but my cumulative GPA still went down from last semester to this​ semester." Explain to Sally how this is possible.

​Sally's GPA for this semester is lower than her cumulative GPA

Suppose the total cost of producing 5,000 tennis balls is ​$50,000​, and the fixed cost is ​$10,000. What is the variable​ cost? ​ When output is 5,000​, what is the average fixed​ cost? Assuming that the cost curves have the usual​ shape, the dollar difference between average total costs and average variable costs ____ as output increases

40000 $8 2 decreases

List the errors in the graph to the right ​(where AFC is average fixed​ cost, AVC is average variable​ cost, ATC is average total​ cost, and MC is marginal cost​).

AFC should be​ MC, ATC should be​ AVC, and AVC should be ATC.

What is the difference between the average cost of production​ (ATC) and marginal cost of production​ (MC)?

ATC = TC/Q​; MC =ΔTC/ΔQ.

Devra​ Gartenstein, a restaurant​ owner, made the following observation about preparing​ food: "Cooks become increasingly less productive as a kitchen becomes increasingly​ crowded." ​Source: Devra​ Gartenstein, "Law of Diminishing Marginal Returns in Restaurant​ Operations," smallbusiness.chron.com. What do economists call the problem she is​ describing? What are its implications for the marginal product of labor for​ cooks? Do restaurant owners have a solution to this problem in the long​ run? Briefly explain.

Diminishing marginal​ returns, where additional cooks produce less additional output. ​Yes, restaurant owners can vary the​ size, or​ number, of kitchens.

What is the difference between the short run and the long​ run? Is the amount of time that separates the short run from the long run the same for every​ firm?

In the short​ run, at least one of a​ firm's inputs is​ fixed, while in the long​ run, a firm is able to vary all its inputs and adopt new technology. no

Is it possible for technological change to be​ negative? If​ so, give an example.

It is possible for technological change to be negative. An example is when a firm hires less−skilled workers

What is the difference between technology and technological​ change?

Technology is the process of using inputs to make​ output, while technological change is when a firm is able to produce more output using the same inputs.

Is it possible for average total cost to be decreasing over a range of output where marginal cost is​ increasing? Briefly explain.

Yes. If marginal cost is less than average total​ cost, then average total cost will be decreasing.

What is negative technological​ change? Negative technological change is when

a firm produces less output with the same inputs

What are implicit​ costs? An implicit cost is How are implicit costs different from explicit​ costs?

a nonmonetary opportunity cost. An explicit cost is a cost that involves spending​ money, while an implicit cost is a nonmonetary cost

What is the law of diminishing​ returns? The law of diminishing returns states that Does it apply in the long​ run?

adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. no

How do specialization and division of labor typically affect the marginal product of​ labor? In the initial stages of​ production, specialization and division of labor lead to an increasing marginal product for​ workers,

allowing workers to concentrate on a few tasks so that they become more skilled at doing them quickly and efficiently.

Firms experience economies of scale. for several reasons. What is one such​ reason? A firm might experience economies of scale because

as a firm expands, it may be able to borrow money more inexpensively.

As the level of output​ increases, what happens to the difference between the value of average total cost and average variable​ cost? As the level of output​ increases, the difference between the value of average total cost and average variable cost

decreases because average fixed cost decreases as output increases.

A book providing advice to entrepreneurs describes some business costs as being​ "the amount of money that will go out even if none at all comes​ in." ​Source: Tom​ Hodgkinson, Business for​ Bohemians: Live​ Well, Make Money​, New​ York: The Overlook​ Press, 2018, p. 40. a. The author isdescribing a​ business's ____ cost Which of the following is an example of this type of​ cost?

fixed rent for a store or warehouse

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost. The payment she makes on her fire insurance policy is a ___ cost The payment she makes to buy pizza dough is a ___ cost The wages she pays her workers is a _____ cost. The lease payment she makes to her landlord who owns the building where her store is located is a ___ cost The​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a ____ cost

fixed variable variable fixed fixed

Any cost that remains unchanged as output changes represents a​ firm's Any cost that changes as output changes represents a​ firm's Which of the following is most likely to be a fixed cost for a​ farmer? Which of the following is most likely to a variable cost for a business​ firm?

fixed cost variable cost. insurance premiums on property cost of shipping products


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