Production - ECON 2302
The short run is:
A period of time in which at least one input of production is fixed.
Average Fixed Cost
AFC = ATC - AVC
Short Run
A period of time in which at least one input of production is fixed.
In addition to total cost, it is useful to calculate average cost because:
- Average cost can be compared directly to the price. - Average cost numbers are more useable for managing.
Total Cost
The sum of fixed and variable costs of production.
Costs that change with the amount of output produced are _____ costs.
Variable
Total _____ equals price times quantity.
Revenue
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are _____ is the long-run average cost curve.
Variable
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are _____ is the long-run average curve.
Variable
Which of the following are the reasons are the reasons for breaking average total cost into two components?
- Average variable cost is used to determine whether a firm should continue to operate or should shut down in the short run. - The constantly declining average fixed cost is apparent.
The fixed cost per unit is equal to:
Average fixed cost.
_____ economic profits encourage firms to exit the market.
Negative
Total revenue equals:
Price times quantity
Accounting Profit
Total revenue minus the explicit costs of production.
Total cost per unit is equal to:
Average total cost.
To determine the true cost associated with the production of goods or services, _____ costs should be taken into account.
Implicit
One potential reason diseconomies of scale could exist is that:
Inputs are not as productive as the inputs used before.
If a company decides to produce zero units of output:
It still has to pay fixed costs of production.
Economic Costs
The costs associated with the use of resources; the sum of explicit and implicit costs.
Marginal Cost (MC)
The extra or additional cost associated with the production of an additional unit of output.
Minimum Efficiency Scale
The lowest level of output at which the long-run average total cost is minimized.
Short-Run Average Total Cost Curve (ATC)
A curve showing the average total cost for different levels of output when at least one input of production is fixed, typically plant capacity.
In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?
- The extra cost associated with producing an additional unit of output. - The extra benefit of producing that unit.
In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?
- The marginal cost. - The marginal revenue.
Marginal cost:
- Will cause the average cost to rise only if the marginal cost is rising. - Can only equal the average cost when the marginal cost is rising.
Explicit costs also known as _____ costs.
Accounting
Long-Run Average Total Cost Curve (LRATC)
A curve showing the lowest average total cost possible for any given level of output when all inputs pf production are variable.
The shape of the marginal cost curve is dependent on the:
Law of diminishing marginal returns.
A period of time in which all inputs of production are variable is the _____ run.
Long
Decreasing _____ returns are a characteristic of production whereby the marginal product of decreasing of the next unit of a variable resource utilized is less than that of the previous variable resource.
Marginal
An _____ cost is associated with any cost, whether it is an implicit cost or an explicit cost.
Opportunity
When the ______ cost falls below the ____ average cost, the average cost should be decreasing.
Marginal; average
If a business owner can produce more as a whole with am additional worker even if the marginal product associated with that worker is lower than the marginal product associated with the pervious worker, then there are:
Diminishing marginal returns.
Average Total Cost
ATC = TC/Q or AFC + AVC
A condition in which the long run- average total cost of production remains constant as production increases is called:
Constant returns to scale.
Average Total Cost (ATC)
Total cost (TC) divide by the amount of output produced; total cost er unit.
Average Fixed Cost (AFC)
Total fixed cost (TFC)divided by the amount of output produced; fixed cost per unit.
Economic Profit
Total revenue minus economic costs, which include both explicit and implicit costs of production.
Average Variable Cost (AVC)
Total variable cost (TVC) divided by the amount of output produced; fragile cost per unit.
Diseconomies of Scale
A condition in which the long-run average total cost of production increases as production increases.
Average produce is the:
Amount of output produced per unit of a resource employed.
Marginal product is the:
Additional output produced as a result of utilizing one more unit of a variable resource.
A curve showing the _____ total cost for different levels of output when at least one input of production is fixed, typically plant capacity, is the short-run average cost curve.
Average
The amount of output produced per unit of a resource employed is the _____ product.
Average
Total product divided by the number of units of a resource employed gives the _____ product of the resource.
Average
Explicit costs are also known as _____ costs.
Accounting
The vertical distance between the average variable cost and the average total cost curves is equal to:
Average fixed cost.
Total fixed cost divided by the amount of output produced is equal to:
Average fixed cost.
Total variable cost divided by the amount of output produced is equal to:
Average variable cost.
Variable cost per unit is equal to:
Average variable cost.
One potential reason diseconomies of scale could exist is the a firm:
Cannot perfectly replicate its production when it expands.
Variable Costs
Costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases.
If a business owner can produce more as a whole with an additional worker even if the marginal product associated with that worker os lower than the marginal product associated with the previous worker, then there are:
Diminishing marginal returns.
Total revenue minus the explicit and implicit costs of production is _____ profit.
Economic
Zero _____ profit is the revenue needed for a company to break even and meet operating costs without a loss.
Economic
Total revenue minus the total _____ costs of production is accounting profit.
Explicit
Economic costs can be defined as the sum of _____ and _____ costs.
Explicit; implicit
Increasing marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is _____ than that of the pervious variable resource.
Greater
Increasing marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is _____ than that of the precious variable resource.
Greater
Decreasing _____ returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
Marginal
Explicit Costs
Monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial owned by others. Also known as accounting costs.
A curve showing the average total cost for different levels of output when at least _____ input of production is fixed, typically plant capacity, is the short-run average cost curve.
One
The _____ costs of using owned resources are implicit costs.
Opportunity
To determine the true cost associated with the production of goods or services, ______ costs should be taken into account.
Opportunity
When there are diminishing marginal returns,
The marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
Implicit Costs
The opportunity costs of using owned resources; costs for which no monetary payment is explicitly made.
Economies of scale can result from a variety of factors, including:
- Lower costs of input as firms purchase larger quantities. - Productivity gains from more specialized labor.
Increasing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that if the previous variable resource.
Diminishing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of a variable resources utilized is less than that of the pervious variable resources.
Economies of Scale
A condition in which the long-run average total cost of production decreases as production increases.
Constant Returns to Scale
A condition in which the long-run average total cot of production remains constant as production increases.
Fixed
Costs that do not change with the amount of output produced.
Fixed Costs
Costs that do not change with the amount of output produced.
Positive _____ profits encourage more firms to enter the market to produce goods and services.
Economic
A condition in which the long-run average total cost of production decreases as production increases is called:
Economies of scale.
Monetary payments made by individuals, firms, and governments for the use of others' land, labor, capital and entrepreneurial ability are _____ costs.
Explicit
If a company decides to produce zero units of output, it still has to pay total _____ costs of production.
Fixed
Costs that do not change with the amount of _____ produced are fixed costs.
Output
Costs that do not charge with the amount of _____ produced are fixed costs.
Output
The total amount of output produced with a given amount of resources is known as the total _____.
Product
Marginal Product (MP)
The additional output produced as a result of utilizing 1 more unit if a variable resource (i.e, labor or capital)
Average Product (AP)
The average amount produced per unit of a resource employed; total product divided by the number of units of a resources employed.
Total Product (TP)
The total amount of output reduced with a given amount of resources.
