Econ Unit 5 Test

The idea of diminishing returns to an input in production suggests that if a local college adds more and more custodians, the marginal product of labor for the custodial staff will____ over time

Decrease

When machinery experiences wear and tear from usage, this is often referred to as

Depreciation

When AVC eventually increases as output increases, this is referred to as the____ effect

Diminishing returns

The long-run average cost curve will be upward sloping when the firm is experiencing

Diseconomies of scale

If the marginal cost curve is upward-sloping, this mans that as output___, marginal costs will____

Increase; increase

(figure 55-2: short-run costs) A is the___ cost curve

Marginal (curve passes through both lines at points D and E)

The____ is the increase in output obtained by hiring an additional worker.

Marginal Product

(figure 51-6: long-run average cost) Output per period in the region from 0 to A indicates that a firm is experiencing

Economies of scale (curve slowly decreases from 0-A)

(Figure 54-1 total product) B/n points A and B the marginal product of labor is

Falling (graph shows increase between A and B which shows Output and Units of labor increasing)

(Figure 55-2: short-run costs) The vertical difference between curve B and curve C at any quantity of output is:

Fixed cost (B-C)

An input whose quantity CANNOT be changed during a particular period is a(n)

Fixed input

In the short run

Some inputs are fixed and some inputs are variables

When an increase in the firm's output reduces its long-run average total cost, it experiences

Economies of scale

A total product curve indicates the relationship between

A variable input and output

Bessis wants to calculate the accounting and economic profits on her cattle farm in Nebraska. She pays $30,000 per year for the cost of raising cattle, $80,000 in wages, $20,000 in insurance, and she forgoes $30,000 per year that she could be making as a teacher. If her total revenue is $140,000, that means her accounting profit is____ and her economic profit is_____.

Accounting (140,000-(30,000+80,000+20,000))= 10,000 Economic (140,000-(30,000+30,000+80,000+20,000)=$-20,000

Profit computed using explicit costs as the only measure of cost is

Accounting profit

Sunk costs

Are not considered in marginal analysis

If ATC is equal to MC; then one is operating

At the minimum point of ATC

(figure 55-2: short-run costs) B is the___ cost curve

Average Total (its the highest one above the rest)

(figure 55-2: short-run costs) C is the___ cost curve

Average variable (it is the lowest curve)

William installs custom sounds systems in cars. If he installs 7 systems per day, his total costs are $300. If her installs 8 systems per day, his total costs are $400. William will install only 8 sound systems per day if the eighth customer is willing to pay at least:

$100

(table 55-3: cost of producing bagels) The average total cost of producing six bagels is

.15 (ChangeTC/Q $.90/6= .15)

(table 55-3: cost of producing bagels) The marginal cost of producing the sixth bagel is

.20 (change in cost/change in Q $.90-$.70/ 6-5=.20)

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is

300 bushels

You own a small deli that produces sandwiches, soup and other items for customers in your town. Which of the following is a fixed input in the production function at your deli?

The dining room where customers eat their meals

If economic profit for a firm is negative

The firm should exit the industry in the long run

The implicit cost of capital is

The opportunity cost of capital used by a business

The production function provides information about

The transformation of inputs into outputs.

The sum of fixed and variable costs is

Total cost

In the long run, all costs are

Variable