Chapter Thirteen

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

diminishing marginal product

A total-cost curve shows the relationship between quantity of output produced and

the total cost of production

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

15 bouquets

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

$150

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog be sold for a price of $65. The Three Amigo's total costs are

$25,000

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

$40

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are

$7,500

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

38 bouquets

The cost of producing the typical unit of output is the firm's

average total cost

The efficient scale of the firm is the quantity of output that minimizes

average total cost

Firms may experience diseconomies of scale when large management structures are

bureaucratic and inefficient

Constant returns to scale occur when the firm's long-run average total costs are

constant as output increases

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product

If the total cost curve gets steeper as output increases, the firm is experiencing

diminishing marginal product

A difference between explicit and implicit costs is that implicit costs

do not require a direct monetary outlay by the firm, whereas explicit costs do

Suppose that a firm's long-run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing

economies of sale

Lease payments for the land on which a firm's factory stands is an example of an

explicit cost of produciton

A firm's opportunity costs of production are equal to its

explicit costs + implicit costs

When marginal cost is less than average total cost, average total cost is

falling

The cost of mortgage on the building is

fixed

Average total cost is increasing whenever marginal cost is

greater than average total cost

Assuming that implicit costs are positive, accounting profit is

greater than economic profit

The value of the business owner's time is an example of an

implicit cost of production

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs

The average fixed cost curve always declines with

increased levels of output

Diseconomies of scale occur when a firm's long-run average total costs are

increasing as output increases

A production function describes how a firm turns

inputs into output

Economists normally assume that the goal of a firm is to

maximize its profit

Marginal cost is equal to average total cost when average total cost is at its

minimum

Marginal cost is the change in total cost resulting from the production of

one more unit of output

The marginal product of labor is equal tot eh increase in output obtained from

one unit increase in labor

Economic profit is equal to total revenue minus the

opportunity cost of producing goods and services

The things that must be forgone to acquire a good are called

opportunity cots

Fixed cost remains the same irrespective of units of

output produced

Assume a certain firm regards the number of workers it empolys as variable but regards the size of its factory as fixed. This assumption is often realistic in the

short run but not in the long run

One assumption that distinguishes short-run cost analysis from long0run cost analysis for a profit-maximizing firm is that in the short run, the

size of the factory is fixed

Economies of scale arise when workers are able to

specialize in a particular task

Average total cost curves decline at first because fixed cost is

spread out over larger amounts of production

Accounting profit is equal to total revenue minus

the explicit cost of producing goods and services

The amount of money that firm pays to buy inputs is called

total cost

The cost of jet fuel for an airplane is

variable

If a firm produces nothing, what cost will be zero?

variable cost