M i c r o HW/Q 7

I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was

$2 TC = FC + VC.....Here:$40,000 = $16,000 + $24,000, based on the info provided. _______AFC= FC / Q Here AFC = $16,000/8,000 = $2.

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

diseconomies of scale ***** this answer was graded as wrong; sent email to teacher, pick the choice that is "A & B" (In economics, the term diseconomies of scale describes the phenomenon that occurs when a firm experiences increasing marginal costs per additional unit of output. It is the opposite of economies of scale.)

the Term _____ describes a situation where the quantity of outputs rises, but the average cost of production falls.

economies of scale

When _______ exist, doubling of all inputs will result in more than doubling output, which means _______________________.

economies of scale; a larger factory can produce at a lower average cost that a smaller company.

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

expanding all inputs does not change the average cost of production

In microeconomics, the term ___ is synonymous with economies of scale

increasing returns to scale

The term____ is used to describe the additional cost of producing 1 more unit

marginal cost

In order to determine the average variable cost, the firm's variable cost are divided by _______

the quantity of output

The Marginal cost curve is generally _____, because diminishing marginal returns implies that additional units are ___________

Upward-sloping; more costly to produce (per textbook)

_________ include all of the costs of production that increase with the quantity produced.

Variable cost

_______occur when the marginal gain in output diminishes as each additional unit of input is added.

diminishing marginal returns

in Microeconomics, the term _________ is synonymous with decreasing returns of scale

diseconomies of scale

_______ tells a firm whether it can earn profits given the price in the market

Average Cost

In order to determine _____, the firm's total cost must be divided by the quantity of its output

average cost

A situation known as ___________ occurs when all production inputs are allowed to expand, but the expansion does not result in much of a change in the average cost of production.

constant returns to scale

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

If a solar panel manufacturer want 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 2 categories: fixed cost that can't be changed in the short run and variable cost that can be

A firm's ______ consists of expenditures that must be made before production starts that typically, over the short run, __________regardless of the level of production.

fixed costs; do not change

Which of the following should typically be ignored because spending has already been made and cannot be changed?

sunk cost

If a paper mill shuts down its operations for 3 months so that it produces nothing, its _____ will be reduced to zero?

variable costs