ECO/365 Production

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which of the following 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. -They constantly declining average fixed cost is apparent.

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 usable for managing.

The average _______ costs always declines with additional output, while the average ________ and average _______costs decline and then increase.

-fixed -variable -total

Total revenue minus the explicit cost of production is ________ profit

accounting

The fixed cost per unit is equal to:

average fixed cost

The vertical distance between the average variable cost and the average total cost curves gets smaller as more output is produced because this distance is equal to the:

average fixed cost, which declines as output increases.

Total cost divided by the amount of output produced is equal to:

average total cost

Total variable cost divided by the amount of output produced is equal to:

average variable cost.

Negative _________ profits encourage firms to exit the market.

economic

Monetary payments made by individuals, firms, and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____costs.

explicit

Total revenue minus the total _______ costs of production is accounting profit.

explicit

When the marginal product increases, the marginal cost of production

falls

The opportunity costs of unsing owned resources are _________ costs.

implicit

If a company decides to product zero units of output:

it still has to pay fixed costs of production.

A curve showing the ________ average total cost possible for any given level of output when all inputs of prodcution are variable is the long-run average cost curve.

lowest

Total revenue equals:

price times quantity

total cost equals:

total fixed cost plus total variable cost

Costs that increase as production increases and decrease as production decreases are ______ costs.

variable

Total ________ costs change with output, whereas total ______costs do not.

variable; fixed


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