ECON 206 Production

Variable cost per unit of output produced is:

average variable cost

A condition in which the long-run average total cost of production remains constant as production increases is called:

constant returns to scale.

Economies of scale is a condition in which the long-run average total cost of production _______ as production increases.

decreases

The average fixed cost curve:

decreases for all levels of output.

The lowest level of output at which the long-run average total cost is minimized is called minimum _______ scale.

efficiency

Because the cost of a container is proportional to its surface area, by doubling the diameter of a container, a producer can:

experience economies of scale.

A company currently producing 10 air conditioners each day has daily total costs of $1,500. Producing an additional air conditioner will increases costs by $250 daily. What are the total daily costs for the firm if they produce the

$1,750

What is the total cost of production associated with the 3rd raincoat?

$62.50

Suppose a snowboard manufacturer increases its output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $100 to $110. The marginal cost of producing an extra snowboard is $

10

What is the average product when there are two workers?

125 computer chips

A person who has been managing a dry cleaning store for $30,000 per year decides to open her own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The revenues of the store during the first year of operation are $100,000. The total accounting profit is $

40000

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The total economic cost is $

90000

Which of the following is a source of economies of scale for a firm?

An increase in the specialization of labor

What is the appropriate label for Curve Y in the nearby graph?

Average Product

Which of the following is true of economic costs?

Economic costs are defined as the sum of explicit and implicit costs.

What are the appropriate labels for Curves N and M in the nearby graph?

Curve N is total cost and Curve M is total variable cost.

________ of scale is a condition in which the long-run average total cost of production increases as production increases.

Diseconomies

Which of the following is a way in which firms can avoid paying fixed costs in the short run?

Firms cannot avoid fixed costs in the short run.

________ marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.

Increasing

Which of the following is true of the shape of the marginal cost curve?

It is U-shaped.

A firm is reducing their output from 2,000 units to 1,000 units. This decision results in a reduction in the long run average cost from $300 to $200. What can be said about this firm?

The firm is experiencing diseconomies of scale.

A firm is planning to increase output in the long run from 100 units to 200 units. The long run average total cost falls from $25 to $20. What can be said about this level of output?

The firm is experiencing economies of scale.

________ cost equals total fixed cost plus total variable cost.

Total

The shape of the long-run average total cost curve can differ for different types of firms. (True or False)

True

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

In addition to total cost, it is useful to calculate ______ cost because it can be compared directly to the price.

average

Total product divided by the number of units of a resource employed gives the ________ product of the resource.

average

When the marginal cost is above the average cost, the __ cost should be increasing.

average

The fixed cost per unit is equal to:

average fixed cost

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

average variable cost.

The marginal cost curve is:

decreasing for low levels of output, then begins increasing.

For quantities occurring before the marginal cost curve and average total cost curve intersect, the average total cost curve will be:

decreasing.

A condition in which the long-run average total cost of production increases as production increases is called:

diseconomies of scale.

Business operating decisions should be based on _____ profit.

economic

Total revenue minus the explicit and implicit costs of production is _____ profit.

economic

Zero accounting profit means that the value of _____ profit is negative.

economic

The costs associated with the use of resources are called:

economic costs.

A condition in which the long-run average total cost of production decreases as production increases is called:

economies of scale.

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

explicit

A firm incurs _______ costs when it pays for a factor of production at the same time that it uses it, whereas _________ costs are the costs associated with a firm's use of resources that it owns.

explicit, implicit

_______ costs are also known as accounting costs, whereas _______ costs are the opportunity costs of using owned resources.

explicit, implicit

Economic costs can be defined as the sum of _____ and _____ costs.

implicit; explicit

Total revenue minus the total _____ and total _____ costs of production is economic profit.

implicit; explicit

Diseconomies of scale is a condition in which the ________ -run average total cost of production increases as production increases.

long

The ________ -run average total cost curve relates to the _________ -run average total cost curves for different plant configurations.

long, short

Constant returns to scale occur when:

long-run average total cost does not change as output increases.

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

lowest

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

lowest

The marginal cost curve shows the relationship between:

marginal cost and output.

When the ________ cost is above the _______ cost, the average cost should be increasing.

marginal, average

The _______ costs of using owned resources are implicit costs.

opportunity

Costs that do not change with the amount of _____ produced are fixed costs.

output

Costs that do not change with the amount of ________ produced are fixed costs.

output

Total revenue equals:

price times quantity

The total amount of output produced with a given amount of resources is known as the total

product

When the marginal ______ increases, the marginal cost of production declines.

product

When the marginal ___________ increases, the marginal cost of production declines.

product

Total _______ equals price times quantity

revenue

Economic profit consists of _____; accounting profit consists of _____.

revenue minus implicit and explicit costs; revenue minus explicit costs

A curve showing the average total cost for different levels of output when at least one input of production is fixed typically plant capacity is the _______ -run average cost curve.

short

A period of time in which at least one input of production is fixed is known as the ________ (short/long) run.

short

Minimum-efficiency scale refers to the:

the lowest level of output at which the long-run average total cost is minimized

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.

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's) $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The implicit costs include:

the owner's forgone salary.

Total product is:

the total amount of output produced with a given amount of resources

The total amount of output produced with a given amount of resources is known as:

total product.

A curve showing the lowest average total cost possible for any given level of output when all inputs of production are _______ (variable/fixed) is the long-run average cost curve.

variable

Costs that change with the amount of output produced are _____ costs.

variable

What is the marginal product of the second worker?

150 computer chips

Suppose a snowboard manufacturer increases it output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $120 to $145. The marginal cost of producing an extra snowboard is $

25

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

accounting

Total revenue minus the explicit cost of production is _____ profit.

accounting

Zero _______ profit means that the value of economic profit is negative.

accounting

The short run is a period of time in which:

at least one input of production is fixed.

Average total cost equals:

average fixed cost plus average variable cost

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

explicit

The marginal cost is the:

extra or additional cost associated with the production of an additional unit of output.

When marginal cost is less than average cost, average cost:

falls

When the marginal product increases, the marginal cost of production

falls

Costs that do not change with the amount of output produced are _____ costs.

fixed

Total cost equals total _______ cost plus total ______ cost.

fixed, variable

The average total cost curve is:

greater than the average variable cost curve for all levels of output.

Costs for which no monetary payment is explicitly made are ______ costs.

implicit

The shape of the marginal cost curve is dependent on the:

law of diminishing marginal returns.

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

long

A period of time in which all inputs of production are variable is the _______ run.

long

Diseconomies of scale is a condition in which the _______ -run average total cost of production increases as production increases.

long

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

Increasing ________ returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.

marginal

Total ______ costs change with output, whereas total _______ costs do not.

variable, fixed

Total _____ costs change with output whereas total _____ costs do not.

variable; fixed

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

average total cost.

The opportunity costs of using owned resources are ______ costs.

implicit

The average product curve is:

increasing before reaching its peak, then decreasing.

If a company decides to produce zero units of output,:

it still has to pay fixed costs of production.

The extra or additional cost associated with the production of an additional unit of output is the _____ cost.

marginal

When examining the cost curves for a firm, the minimum average variable cost occurs at the output level where:

marginal cost equals average variable cost.

The extra or additional cost associated with the production of an additional unit of output is the:

marginal cost.

The additional output produced as a result of utilizing one more unit of a variable resource is called:

marginal product.

Marginal product is the:

the additional output produced as a result of utilizing one more unit of a variable resource

Average product is the:

the amount of output produced per unit of a resource employed

Diseconomies of scale is a condition in which the long-run average total cost of production _________ as production increases.

increases

A period of time in which at least one _______ of production is fixed is known as the short run.

input

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

average fixed cost.

(Average fixed cost + average variable cost) =

average total cost

Total cost per unit is equal to:

average total cost