ECON-2302: Chapter 7 (Production and Costs)
I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was
$1
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 fixed cost to produce 8,000 specialty pizzas was
$2
I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was
$2.43
____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing marginal returns
In economics, a firm that faces no competitors is referred to as _________________.
a monopoly
The ______________ of all firms can be broken down into some common underlying patterns.
cost structure
When __________________ exist, doubling of all inputs will result in more than doubling output, which means __________________________________________.
economies of scale; a larger factory can produce at a lower average cost than a smaller company
The economies-of-scale curve is a long-run average cost curve, because
it allows all factors of production to change.
________________________ arises where many firms are competing in a market to sell similar but differentiated products.
monopolistic competition
Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.
total revenue