ECN 236 Chapter 6

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

whether the firm is earning profit if fixed costs are left out of the calculation.

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?

costs of research and development

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.

economies of agglomeration; corresponding diseconomies

The economies-of-scale curve is a long-run average cost curve, because

it allows all factors of production to change.

The term _____________ is used to describe the additional cost of producing one more unit.

marginal cost

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

If a paper mill shuts down its operations for three months so that it produces nothing, it's __________________ will be reduced to zero?

variable costs

A situation where the level of output, scale and average costs are all rising is called

-decreasing returns to scale - diseconomies of scale

In the US economy, nearly half of all the workers employed by private firms work at

18,000 large firms that employ more than 500 workers.

_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

Agglomeration factors

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms

Total costs

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Total revenue

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

Fixed costs are important because, at least in the ___________, the firm _______________.

short run; cannot alter them