Econ chapter 11
Which of the following is correct about marginal and average products?
When the marginal product exceeds the average product, the average product must be increasing.
The downward sloping part of the long run average total cost curve is where the firm is achieving:
economies of scale
When a firm's long−run average total cost decreases as its output increases, the firm is experiencing
economies of scale
At the Punjab Bakery, two workers can decorate 14 cakes in an hour and three workers can decorate 18 cakes in an hour. The marginal product of the third worker is
4 cakes and the average product for three workers is 6 cakes.
economies of scale
LRAC down as quantity goes up
diseconomies of scale
LRAC goes up as quantity goes up
Mc curves intersects the ATC and AVC curves at their
minimum point
What is the name for the additional output that a firm produces as a result of hiring one more worker?
marginal product of labor
If a business owner decided to expand her business but rather than borrowing money from a bank used her own funds, then
she would be unable to forego the opportunity to earn interest on the money
What does the long−run average cost curve show?
the lowest average cost to produce each output level in the long run
The long run is defined as
the period of time when all resources are variable
In economics, the best definition of technology is
the process a firm uses to turn inputs into outputs.
Moving from left to right along a long-run average cost curve,
the scale of production always increases.
Which of these costs are affected by the level of output produced?
variable costs
Average Variable Cost (AVC)
variable costs divided by quantity of output
The relationship between the inputs used by the firm and the maximum output it can produce is known as the:
production function
The total variable cost curve ____ because ____ as output increases.
slopes upward; variable cost increases
The total variable cost curve ________ because ________ as output increases.
slopes upward; variable cost increases
The main source of economies of scale is
specialization.
Which of the following always decreases when output increases?
average fixed cost
positive technological change is defined as
being able to produce more output using the same inputs and being able to produce the same output using fewer inputs.
Increasing marginal returns always occurs when the
marginal product of an additional worker exceeds the marginal product of the previous worker
Increasing marginal returns occur when the
marginal product of an additional worker exceeds the marginal product of the previous worker
The short run is
the time frame in which some resources are fixed.
When graphing a conventional short-run production function, we place __________ on the horizontal axis and __________ on the vertical axis.
the variable input, output
One of the major reasons for the U-shaped average total cost curve is the fact that
there eventually are decreasing returns from labor as more workers are employed.
Average Total Cost (ATC)
total costs divided by quantity of output
Which of the following is correct for variable and marginal costs?
they will equal zero if nothing is produced
average product of labor APL
total output divided by the number of workers
The marginal product of labor equals the change in ________ from a one−unit increase in the quantity of labor.
total product
Total product is equal to the
total quantity produced in a given time period
f a firm does not produce any output, its
total variable cost must be zero
What is the difference between the short run and the long run?
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.
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.
Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed sized plant because
adding more workers exhausts the possible gains from specialization.
Minimum efficient scale is the level of output at which:
all economies of scale have been exhausted
A cost paid in money is
an explicit cost and an opportunity cost.
Short-run decisions ____ easily reversed; long-run decisions ____ easily reversed.
are, are not
If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?
as a part of fixed cost
A firm can enjoy economies of scale because of increased specialization of
capital and/or labor
As a typical firm increases its output, its marginal cost
decreases at first then increases
If a firm increases the size of its plant and its labor force by the same percentage and as a result its average total cost increases, then the firm is experiencing
diseconomies of scale
When a firm becomes so large it is difficult to coordinate and control, it is most likely that
diseconomies of scale have begun
Jeremiah runs a bullfrog farm in Frogville, Oklahoma. Jeremiah notices that each additional worker he employs adds more to the total output than does the previous worker. Jeremiah must be
experiencing increasing marginal returns to labor
Which of the following are sometimes called accounting costs?
explicit
In the short-run, the cost that is independent of the amount of output produced is called __________.
fixed cost
Average Fixed Cost (AFC)
fixed costs divided by quantity of output
When marginal cost is positive, total cost is ____ as output increases.
increasing
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:
increasing
The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of
increasing and then decreasing marginal returns as more labor is hired.
To produce more output in the short run, a firm must employ more of
its variable resources
Diseconomies of scale can occur as a result of which of the following?
management difficulties as the firm increases its size
If average variable costs increase as output increases, then
marginal cost must be greater than average variable cost.
Scott owns a law−enforcement training operation in Boise, Idaho. He employs three trainers. The last trainer Scott hired increased Scott's total cost by $466 per week even though the trainer brought in only one new client. Hence Scott's
marginal cost of the last client equals $466.
Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?
opportunity cost
When an economist uses the term "cost" referring to a firm, the economist refers to the
opportunity cost of producing a good or service, which includes both implicit and explicit cost.
The total product curve shows the relationship between
output and the quantity of labor.
Economies of scale and diseconomies of scale explain
the U-shape of the long-run average cost curve.