Chapter 9- Microeconomics
fixed costs are associated with
the short run only
the law of diminishing returns indicates that
as extra units of a variable resource are added to fixed resource, marginal product will decline beyond some point
accounting profits are typically
greater than economic profits because the former do not take implicit costs into account
if you owned a small farm, which of the following would most likely be a fixed cost
hail insurance
The ABC corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that initially it was producing:
in the range of diseconomies of scale
Which of the following is correct as it relates to cost curves
marginal cost intersect average total cost at the latter's minimum point
marginal product
may initially increase, then diminish, and ultimately become negative
Production Costs to an economists
reflect opportunity costs
Marginal cost is: (basic info of question below) TFC= total fixed cost MC= marginal cost TVC= total variable cost Q= quantity of output P= product price
Change in TVC( Total Variable Cost) ---------------------------------------- Q (Quantity of output)
average fixed cost
declines continually as output increase
the short run is characterized by
fixed plant capacity
when diseconomies of scale occur
the long-run average total cost curve rises
normal profit is
the return to the entrepreneur when economic profits are zero
Refer to data. If the firm closed down in the short run and produced zero units of output, its total cost would be OutPut Average Fixed Cost Average Variable Cost 1 50 100 2 25 80 3 16.67 66.67 4 12.50 65 5 10 68 6 8.37 73.33 7 7.14 80 8 6.25 87.50
$50
An explicit cost is
a money payment made for resources not owned by the firm itself
Economic cost can best be defined as
a payment that must be made to obtain and retain the services of a resource
In comparing the changes in TC and TVC associated with an additional unit of output, we find that
both TC and TVC are equal to MC
the long run is characterized by
the ability of the firm to change its plant size
implicit and explicit costs are different in that
the former refer to non expenditure costs and the latter to monetary payments
a natural monopoly exists when
units cost are minimized by having one firm produce an industry's entire output