MicroEconomics - Pearson - Chapter 11 Concept Check and Vocabulary
Refer to the table to the right. What is the marginal cost of producing the 200th pizza?
$3.25
Fixed Costs
Costs that remain constant as output changes.
Explicit Cost
A cost that involves spending money
Explicit costs are sometimes called:
Accounting Costs
Economic costs include both:
Accounting Costs and Implicit Costs
When a positive technological change occurs,
Answer: Either (a) or (b) A. more output can be produced from the same inputs. B. the same output can be produced with fewer inputs.
The Average Product of Labor is the
Average of the Marginal products of Labor
Marginal product of Labor
The additional output a firm produces as a result of hiring one more worker
Marginal Cost
The change in a firm's total cost from producing one more unit of a good or service
Short Run
The period of time during which at least one of a firm's is fixed.
Long Run
The period of time in which a firm can vary all its inputs, adopt new technology and increase or decrease the size of its physical plant
Law of Diminishing Returns
The principle that, at some point, adding more of a variable input such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.
Technology
The processes a firm uses to turn inputs into outputs of goods and services
Production Function
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
When the marginal product of labor is increasing -
The total output increases at an increasing rate
All of the following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. Which cost measure is the exception?
average fixed cost
What cost measure is equal to AFC plus AVC?
average total cost
Refer to the to graph on the right. When marginal cost is less than average total cost, average total cost must be
decreasing.
Which of the following are sometimes called accounting costs?
explicit costs
The law of diminishing returns applies
in the short run
Refer to the to graph on the right. From point A up until point B,
output increases at a decreasing rate.
Which costs are affected by the level of output produced?
variable costs
Refer to the table below. When do diminishing returns in the production of pizzas start?
when the third worker is hired
Technological Change
A change in the ability of a firm to produce a given level of output with a given quantity of inputs
Implicit Cost
A non-monetary opportunity cost
Variable Costs
Costs that change as output changes
The 7-Eleven chain of convenience stores in Japan reorganized its system for supplying its stores with food. This led to a sharp reduction in the number of trucks the company had to use, while increasing the amount of fresh food on store shelves. Someone discussing 7-Eleven's new system argues "This is not an example of technological change because it did not require the use of new machinery or equipment." Briefly explain whether you agree with this argument.
Both a and b. A. The argument is incorrect. Technology includes the speed of existing machinery and equipment. B. The argument is incorrect. Technology includes the efficiency of existing machinery and equipment.
Which of the graphs (to the right) represents a typical average total cost curve?
Graph B
Total Cost
The cost of all the inputs a firm uses in production. Fixed Costs plus Variable Costs equals Total Costs
Opportunity Costs
The highest valued alternative that must be given up to engage in an activity.
Refer to the to graph on the right. For a certain output range (or quantity of pizzas produced per day), marginal cost is greater than average cost. What is this output range?
The output range greater than about 525 pizzas per day
When the marginal product of labor is decreasing but still positive -
The total output increases, but at a decreasing rate
Average Product of Labor
The total output produced by a firm divided by the quantity of workers.
Average Total Cost
Total cost divided by the quantity of output produced
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be
increasing.
The GPA you earn in a particular semester is your ________ GPA, and your cumulative GPA for all completed semesters is your ________ GPA.
marginal; average
Refer to the to graph on the right. From the origin up until point A
output increases at an increasing rate.
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the
production function.
As output increases, the vertical distance between average total cost and average variable cost curves gets _______ and equals _______.
smaller average fixed cost
Refer to the table to the right. Which of the following costs are implicit costs?
the forgone salary and interest
When the marginal product of labor is rising -
the marginal cost of output is falling
When the marginal product of labor is falling -
the marginal cost of output is rising