ECON 202 Chapter 11
Which of the following explains why the marginal cost curve has a U shape?
Initially, the marginal product of labor rises, then falls
What is the long-run average cost curve?
the curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed
What is the minimum efficient scale?
the lowest level of output at which all economies of scale are exhausted
What is the short run
the period of time during which at least one of a firms input is fixed
What is the long run
the period of time in which a firm can vary all its inputs, adopt new technologies, and change the size of its physical plant
What is the law of diminishing returns
the principle that at some point, adding more of a variable input to the same amount of a fixed input will cause the marginal product of the variable input to decline
What is technology?
the process a firm uses to turn inputs into outputs of goods and services
What is the production function?
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
What is the constant returns to scale?
the situation in which a firms long-run average costs remain unchanged as it increases ouput
What are the economies of scale?
the situation when a firms long-run average costs fall as it increases the quantity of output it produces
In the long run, which of the following is true?
there are no fixed costs
In the short run, which of the following costs will not change as output changes?
total fixed costs
What is the average product of labor?
total output divided by quantity of workers; aka average of the marginal product of labor
What are diseconomies of scale?
when a firms long-run average costs increase with outputs
What are explicit costs?
costs that involve spending money
Which of the following can a firm do in the long run but not in the short run?
decrease the size of its physical plant
An increase in average costs in the short run refers to _______ or in the long run, it refers to _____.
diminishing returns, diseconomies of scale
When a firm doubles all its inputs, its average cost of production decreases, then production displays
economies of scale
What is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or factory?
firms have difficulty coordinating production
What is the difference in the short and long run?
in the short run, at least one of the firms inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technologies, and change the size of the physical plant
If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operating at
less than minimum efficient scale
What are implicit costs?
nonmonetary opportunity costs
Long-run cost curves are U shaped because
of economies and diseconomies of scale
What is the marginal product of labor?
the additional output a firm produces as a result of hiring one more worker
The effects of the law of diminishing returns
are experienced when the third worker is hired
Jennifer moves her office from the premises and rents at a local mall close to her home. As a result of this move:
Jennifer's explicit costs fall and her implicit costs rise
What is a technological change?
a change in the ability of a firm to produce a given level of output with a given quantity of inputs
A positive technological change is when
a firm improves its ability to turn inputs into outputs
A negative technological change is when
a firm must use more inputs to produce the same output
