Econ Chapter 11

How do specialization and division of labor typically affect the marginal product of labor In the initial stages of production , specialization and division of labor lead to an increasing margianl product for workers

allowing workers to concentrate on a few tasks so that they become more skilled at doing them quickly and efficiently

economies of scale happen when the firms long run average total cost ____ as output increases

decreases

ATC = TC / Q ; MC = Change TC / Change Q

difference between the average cost of production ATC and marginal cost of production MC

any cost that remains unchanged as output changes represents a firms any cost that changes as output changes represents a firms what is most likely to be fixed cost for a farmer what is the most likely to a variable cost for a business firm

fixed cost variable cost insurance premiums on property Cost of shipping products

suppose henry ford had continued to experience increasing returns to scale, no matter how large an automobile factory he built. discuss waht the imlpications of this would have been for automobile industry

ford could have profitably sold his cars at a lower price than competitors ford would have been able to produce his cars at lower run average cost than competitors

what are implicit costs

forgone salary and interests

what is a production function a firms production function is best described as a short run production funcition holds constant

illustratin the relationship between inputs and the maximum mounts of output that the firm can produce with these inputs The amount of capital

if the marginal product of labor is rising, is the marginal cost of production rising or failing? Breifly If the additional output from each new worker is rising

the marginal cost of that output is falling becasue the only additional cost to producing more output is the additional wages paid to hire more workers

When a positive technological change occurs

more output can be produced from the same inputs the same output can be produced with fewer inputs

explain whether you agree or disagree with the following statement Henry ford expected to be able to produce cars at a lower average cost

the statement is incorrect . Ford was not able to produce cars at lower average cost due to dieconomies of scale

suppose the total cost of producing 10k tennis balls is 50k and teh fixed cost is 10k

what is the variable cost > 40k

economies of scale occur

when a firms long run average costs decrease with output

what are dis economies of scale

when a firms long run average costs increase with output

which costs are affected by the level of output produced

variable costs

what was the opportunity cost to bennet of his team playing in seattle rather than oklahoma city

82 million because that is the value of the move to OKC

what is the law of diminishing returns the law of diminishing returns states that Does it apply in the long run

Adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline NO

is what sense is this tax smaller when the amount of business is larger

As production increases, fixed cost can be allocated over a greater amount of output, decreasing the averge cost of the tax

explain whether you agree with the following observation Technological change refers only to the introduction of new products, so it is not relevant to the operations of most firms

Correct, technology includes firm operations such as the training of its workers Correct, technology includes firm operations such as the efficiency of its equipment

as the level of output increases, what happens to the difference between the value of average total cost and average variable cost

Decreases because average fixed cost decreases as output increases

when the marginal product of labor is greater than the average product of labor, then the average product of labor must be

Increasing

for jill johnsons pizza restaurant , explain whether each of the following is fixed or variable cost They payment she makes on her fire insurance policy is ____ cost The payment she makes to buy pizza dough is a ____ cost The wages she pays her workers is a ____ cost The lease payment she makes to her landlord who owns the building where her store is located is a ____ cost The 300 dollars per month payment she makes to her local newspaper for running her weekly advertisements is a ____ cost

FIXED VARIABLE VARIABLE FIXED FIXED

positive technological change A firm is able to cut each workers wage rate by 10 percent and still produce the same level of output This _____ an example of positive technological change A training program makes a firms workers more productive This ____ an example of positive technological change An exercise program makes a firms workers more healthy and productive This ____ an example of positive technological change

IS NOT IS IS NOT

is it possible for technological change to be negative

It is possible for technological change to be negative. An example is when a firm hires less -- skilled workers

what do you think of Jills reasoning

Jill is incorrectly ignoring the opportunity cost of using the building she owns

I am currently producing 10k pizza per month at a total cost of 30k. If i produce 10,001 pizzas, my total cost will rise to 30,050. Therefore. my marginal cost of producing pizzas must be increasing

Jills average total cost of production is increasing,, so her marginal cost of producing pizza must be increasing

The GPA you earn in a particular semester is your ____ GPA, and your cumulative GPA for all completed semesters is your _____ Gpa

Marginal, Average

the marginal cost curve intersects both the average variables cost and the average total cost curves at their _____

Minimum

is it possible for a firm to experience a technological change the would increase the marginal product of labor while leaving the average product of labor unchanged

No, an increase in the marginal product of labor will incease the average product of labor

suppose a firm has no fixed cost, so all of its costs are variable , even in the short run If the firm marginal costs are continually increasing (that is , marginal cost is increasing from the first unit of output produced) will the firms average total cost have a U shape If the firms marginal costs are 5 at every level of output, what shape will the firms average total cost have? the firms average total cost curve will be

No, the average total cost curve will be continually increasing Horizontal

what is the difference between technology and technology change

Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs

adams idea of gains to firms from the divison of labor makes a lot of sense when the good of being manufactured is something complex like automobiles or comps. but it doesn't apply in the manufacturing of less complex goods or in other sectors of the economy , such as sales

The argument is incorrect. Gains from division of labor will occur whenever production of a good or provision of a service has multiple tasks

Currently producing 20k pizza/Month = total 60k. If i produce 20,001 pizza, my total cost will rise to 60,002. My marginal cost of producing pizza must be increasing

Though jills average total cost of production is decreasing , her marginal cost of producing pizzas could be increasing or decreasing

explain the marginal cost curve intersects the average variable costs curve at the level of output where average variable cost is at a minimum

When the marginal cost of the last unit produced is below the average , it pulls the average down , and when the marginal cost is above the average , it pulls the average up

It is possible for average total cost to be decreasing over a range of output where marginal cost is increasing?

Yes, if marginal cost is less than average total cost. then the average total cost will be decreasing

are implicit costs how are implicit costs different from explicit costs

a non monetary opportunity cost An explicit cost is a cost that involves spending money, while implicit cost is a non monetary cost

as production levels increase, the nook would become more profitable because

average cost per unit will fall

what cost measure is equal to AFC + AVC

average total cost

many firms consider wage costs to be variable costs . why do academic book publishers usually consider their wages and salary costs to be fixed costs in the cot of rent fixed, variable, or can it both Academic book publishers typically consider the cost of rent

employees work on several books simultaneously to be fixed because it remains constant as output changes

what are sometimes called accounting costs

explicit costs

what is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or factory

firms have difficuty coordinating production

suppose there are substantial economies of scale related to oil production from fracking what is the likely outcome

firms will combine thorugh mergers and acquisitions to become larger

the short run average cost can never be less than the long run average

in the long run , all inputs are adjusted including the ones that are fixed in the short run

what is the difference between total cost and variable cost in the long run

in the long run: the total cost of production equals the variable cost of production

the law of diminishing return applies

in the short run

the difference between the short run and long run Is the amount of time that separates the short run from the long run the same for every firm

in the short run, at least one of a firms inputs is fixed, while in the long run a firm is able to vary all its inputs and adopt new technology NO

7 11 chain of convenience stores in japan reorganized its systems for suppying its stores with food. This led to a sharp reduction in the number of trucks... Example of technological change because it does not require the use of new machinery or equipment

incorrect, technology includes the spee dof existing machinery and equipment Incorrect, technology includes the efficiency of existing machinery and equipment

when Lynch said that "the Nook business will scale" he meant the nook business will

increase in size gaining economy of scale advantages

reasons firms may experience economies of scale

large firms may be able to purchase inputs at lower costs than smaller competitors; they can also borrow money at a lower interst rate firms productions may increase with a smaller proportional increase in at least one input both managers and workers may become more specialized and hence more productive as output expands

a rental car company can realize benefits from economies of scale by

leveraging its purchasing power when buying new cars

an article in forbed discussed an estimate that the cost of materials in apples iphone 5 with 64 gig of memory was 230 apple was selling iphone for 849 can we conclude from this informatoin that apple is making a profit of about 619 per phone

likely less than 619 per iphone because apple also has fixed costs of production

the relationship between the inputs employed by a firm and maximum output it can produce with those inputs is called the

production function

how is it possible my gps for this semesters courses is higher than my gpa for the last semesters course, but my comm gpa still went down from last sem to this semester

sallys gpa for this semester is lower than her cumulative gpa

as output increases, the vertical distance between average total cost and average variable cost curves gets____ and equals ____

smaller, average fixed cost

what is the minimum efficient scale

the level of output at which all economic of scale are exhausted

what term refers to the lowest cost at which a firm is bale to produce a given level of output in the long run when no inputs are fixed

the long run average cost curve

lost nearly 500,000 in cash in addition to an expected return on investment of nearly 500,000, which made a total loss of in come to the company of nearly a million

the report sought to include implicit costs becasue Dupont could have invested its money elsewhere and earned 500,000

the rising costs of chipmaking machines might lead chipmaking companies to build larger factories

to reach the minimum effiecient scale of production

the marginal costs of offering a MOOC are low because

while the upfront time to create the materials is costly , adding another student is low cost

What is likely to happen in the long run to firms that do not reach minimum effiecient scale

will lose money if it remains in business