ECON 2113 EXAM 3

The average fixed cost curve always _____ with increased levels of output.

declines

When adding another unit of labor leads to an increase in output that is smaller than increases in output that resulted from adding previous units of labor, we have the property of _______

diminishing marginal product

One would expect to observe ______ when crowded office space reduces the productivity of new workers.

diminishing marginal product of labor

Fixed costs can be defined as costs that ___ inversely with production.

do not vary

Accounting profit is equal to ____

economic profit + implicit costs.

_______ of scale often arise because higher production levels allow specialization among workers

economies

The use of specialization to achieve ______ is one reason modern societies are as prosperous as they are

economies of scale

Some costs do not vary with the quantity of output produced. Those costs are called _______

fixed costs

Total cost can be divided into two types. Those two types are _____

fixed costs and variable costs.

Longrun average total cost curves are often _______ for the same reasons that average total cost curves are often U shaped.

flat

Because of the greater ______ that firms have in the long run, all short run cost curves lie on or above the long run curve

flexibility

The fact that many decisions are fixed in the short run but variable in the long run ________

has more flexibility

An example of an ____ cost of production would be the cost of forgone labor earnings for an entrepreneur.

implicit

Fixed costs are those costs that remain fixed ______

in the short run

Average total cost is _____ whenever total cost is increasing.

increasing

Marginal cost must rise as the quantity of _____ increases.

input

The marginal product of labor is equal to the incremental cost associated with a one unit increase in _____

input

One assumption that distinguishes shortrun cost analysis from longrun cost analysis for a profitmaximizing firm is that in the short run, output ___ variable.

is

"Constant returns to scale" refers to a situation in which, for a firm, all of the firm's ______ average total cost curves are horizontal.

long run

As a firm moves along its ________, it is adjusting the size of its factory to the quantity of production

long-run average cost curve

The _____ is always flatter than the shortrun average total cost curve, but not necessarily horizontal.

longrun average total cost curve

Economists normally assume that the goal of a firm is to ________

make profit as large as possible even if it means reducing output. make revenue as large as possible.

The ______ of an input in the production process is the increase in total revenue obtained from an additional unit of that input.

marginal cost

The amount by which total cost rises when the firm produces one additional unit of output is called ______

marginal cost

The shape of the ____ curve tells a producer something about the marginal product of her workers

marginal cost

A second or third worker may have a higher ____ than the first worker in certain circumstances

marginal product

If marginal cost is rising, _____ must be falling.

marginal product

Economists normally assume that the goal of a firm is to ______

maximize profit.

Assume Jack received all A's in his classes semester. If Jack gets all C's in his classes this semester, his GPA ____

may or may not fall

The efficient scale of the firm is the quantity of output that ______ marginal product.

minimizes

The firm's efficient scale is the quantity of output that __________

minimizes average total cost.

The marginal cost curve intersects the average total cost curve at the _____ point of the average total cost curve

minimum

The marginal cost of the fifth unit of output equals the total cost of five units ____ the total cost of four units.

minus

Diminishing marginal product suggests that additional units of output become ____ costly as more output is produced.

more

Diminishing marginal product suggests that the marginal cost of an extra worker is _______

negative

Economic profit will ____ accounting profit.

never exceed

Those things that must be forgone to acquire a good are called _____

opportunity costs

A total cost curve shows the relationship between the quantity of an ____ and the total cost of production.

output produced

A _____ is a relationship between inputs and quantity of output.

production function

If a firm produces nothing, ____ will be zero.

profit

An example of a fixed cost would be _____

raw materials supplied at a government regulated price. rent paid on a factory.

When a firm is able to put idle equipment to use by hiring another worker, variable costs will ____

rise.

At all levels of production beyond the point where the marginal cost curve crosses the average variable cost curve, average variable cost _______

rises.

If marginal cost is below average total cost, then average total cost is ______

rising

Assume a certain firm regards the number of workers it employs as variable, and that it regards the size of its factory as fixed. This assumption is often realistic in the ______

short run, but not in the long run

In some cases, ______ allows larger factories to produce goods at a lower average cost than smaller factories

specialization

The firm can vary the number of workers it employs, but not the size of its factory, this assumption is often realistic for a firm in ______

the short run.

To an economist, it is conceivable that the objective that motivates an individual entrepreneur to start a business ______

to help society maximize profit

Average total cost and marginal cost are merely ways to express information that is already contained in a firm's ____

total cost

Economic profit is equal to total revenue minus the _____ of producing goods and services.

total cost

____ tells us the value of all resources used in a production process.

total cost

_____ can be added to profit to obtain total revenue.

total cost

the amount of money that a firm pays to buy inputs is called _______

total cost.

Average total cost is equal to ______

total cost/output

Total revenue equals ______

total output multiplied by price per unit of output.

The amount of money that a firm receives from the sale of its output is called ______

total revenue

Economic profit is equal to _______

total revenue - (explicit costs + implicit costs). total revenue - opportunity costs.

Accounting profit is equal to ______

total revenue - explicit cost

Profit is defined as _____

total revenue - total cost

Average total cost tells us the total cost of the _____ unit of output, if total cost is divided evenly over all the units produced.

typical

In the long run, a factory is usually considered a _______

variable cost

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. The cost of mustard are most likely to be considered _____

variable costs

Average fixed costs ___ with the amount of output a firm produces.

varies

Constant returns to scale occur when long run _____ are constant as output increases.

ATC

When marginal cost is less than average total cost, _____ must be falling.

ATC

______ keep track of the money that flows into and out of firms

Accountants

When economists speak of a firm's costs, they are ____

Always including explicit and implicit costs

When a firm is operating at an efficient scale, ____ is minimized.

Average total cost

Average variable cost is equal to ______

Total variable cost divided by quantity of output

Suppose Jan is starting up a small lemonade stand business. ____ costs for Jan's lemonade stand would include the cost of building the lemonade stand.

Fixed

______ are incurred even when a firm does not produce anything

Fixed costs

Accountants often ignore ____

Implicit costs

The average total cost curve is unaffected by _____

Increasing marginal cost

The cost of producing an additional unit of a good _____ the same as the average cost of the good

Is not

_____ reveals how much total cost will change as the firm alters its level of production

Marginal cost

Economists normally assume that people start their own businesses to help society maximize _____

Profit

Variable costs equal fixed costs when ______

Quantity equals output

The shape of the total cost curve is _____ to the shape of the production function

Related

Diminishing marginal product exists when the total cost curve becomes _____ as outputs increases

Steeper

______ usually change as the firm alters the quantity of output produced

Variable costs

When a factory is operating in the short run, it cannot ____

alter variable costs.

In the long run, inputs that were fixed in the short run _____

are variable

Marginal cost is equal to average total cost when average variable cost is ______

at it's minimum

The cost of producing the typical unit of output is the firm's ______

average total cost.

In the long run, a firm that produces and sells computers gets to choose how many workers to hire, the size of its factories, and which short run ______ curve to use.

average total cost

The _____ curve reflects the shape of both the average fixed cost and average variable cost curves

average total cost

Variable cost divided by quantity produced is _____

average variable cost

Specialization among workers occurs when quality management allows workers to ________

become familiar with only one task

The marginal product of labor can be defined as ______

change in output/change in labor.

One of the most important properties of cost curves is that for most producers , the average total cost curve ______ the marginal cost curve.

crosses

_____ occur when average fixed costs are falling.

Economies of scale

When trying to understand the decision making process of different firms, ______ assume that people think at the margin

Economists

______ require an outlay of money by the firm.

Explicit costs

Implicit costs are costs that ____

Do not require an outlay of money by the firm

_____ exists when the production function becomes flatter as inputs increase

Diminishing marginal product

______ occur when longrun average total costs rise as output increases.

Diseconomies of scale

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at ______

efficient scale

The marginal cost curve crosses the average total cost curve at the _______

efficient scale.

When marginal cost ____ average total cost, average fixed cost must be rising.

exceeds

John owns a shoeshine business. His accountant most likely _____ wages John could earn washing windows.

excludes

The cost of accounting services would be regarded as an _____ cost.

explicit

When marginal cost is less than average total cost, average total cost is ______

falling

If the marginal cost is rising, so is the average total cost curve

false