Chapter 7 Study Quiz

Refer to the table below. At an output of 3 units, the average variable cost is

$14

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'saverage fixed cost to produce 8,000 specialty pizzas was:

$2.00

I''MABigCorp. produces and sells kitchenware. Last year, it produced 7,000 can openersand sold each one for $6. To produce the 7,000 can openers, the company incurred variablecosts of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the7,000 can openers was:

$2.43

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 total profit or loss to produce 8,000 specialty pizzas was:

$24,000 profit

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 variable cost to produce 8,000 specialty pizzas was:

$3.00

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and soldeach one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000and a total cost of $36,000. I'MaGadgetCo's total profit or loss to produce 9,000 widgets was:

$36,000 profit

In the table below, when the firm employs 4 workers, the marginal product of the fourth worker is Input of Labor Total Product 0 0 1 30 2 68 3 110 4 140 5 135

30 smartphones

In the table below, when the firm employs 2 workers, the marginal product of the second worker is Input of Labor Total Product 0 0 1 30 2 68 3 110 4 140 5 135

38 smartphones

The table below sets out cost information for the production of volleyballs. Some values are missing. What is the correct answer for the cell containing A?

42

Refer to the above graph. There are diseconomies of scale:

After Q4

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

Average cost

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

Diminishing marginal returns

Refer to the above graph. There are economies of scale:

From Q1 to Q2

Refer to the above graph. There are constant returns to scale:

From Q2 to Q4

__________ represent the opportunity cost of using resources that the firm already owns.

Implicit costs

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

Total costs

______________ include the costs of production that increase with the quantity produced.

Variable costs

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

constant returns to scale

The ______________ of all firms can be broken down into some common underlying patterns.

cost structure

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

decreasing returns to scale

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

either total cost or variable cost

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

expanding all inputs does not change the average cost of production.

A firm's accounting profit is the result of total revenue minus ______ costs.

explicit

Accounting costs represent

explicit costs paid by the firm.

A firm's ________ consist of expenditures that must be made before production starts that ________ over the short run regardless of the level of production.

fixed costs, do not change

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

The economies-of-scale curve is a long-run average cost curve, because

it allows all factors of production to change.

The term _____________ is used to describe the additional cost of producing one more unit.

marginal cost

Why would labor be treated as a variable cost?

producing larger quantities of a good or service generally requires more workers

Fixed costs are important because, at least in the ___________, the firm _____________.

short run; cannot alter them

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

sunk costs

The marginal product of an input is

the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

Implicit costs are

the opportunity costs of using factors that a producer does not buy or hire but already owns.

In order to determine the average variable cost, the firm's variable costs are divided by____________.

the quantity of output

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

Accounting profit can be calculated as

total revenue - explicit costs.

Economic profits are equal to

total revenues minus the implicit and explicit costs of all inputs used.

The marginal cost curve is generally __________, because diminishing marginal returns implies that additional units are ____________.

upward-sloping; more costly to produce

In the long run, firms can choose their production technology, and so all costs become ______ costs.

variable

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

variable costs