Economics test 2 chapter 7

The law of diminishing returns begins at the level of output where?

Marginal cost is at a minimum.

One reason that a firm may experience decreasing returns to scale is that greater levels of output can result in?

An increase in meetings and paperwork.

Which of the following is an assumption of linear breakeven analysis?

Average fixed cost is constant.

Which of the following short-run cost curves declines continuously?

Average fixed cost.

Learning curves represent the relationship between?

Average variable cost and the cumulative number of units produced.

The responsiveness or sensitivity of a firm's profits to changes in output is measured by a firm's?

Degree of operating leverage.

Which of the following values cannot be calculated at the firm's breakeven level of output?

Degree of operating leverage.

Which of the following is an implicit cost?

Depreciation in the value of a company-owned car as it wears out.

The Japanese cost-management system involves?

Determining how much a product should cost and then determining how it should be produced.

The contribution margin per unit is equal to the?

Difference between price and average variable cost.

One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to?

Employ more specialized machinery. Obtain bulk purchase discounts. Employ a greater division of labor.

If an input is owned and used by a firm, then its?

Explicit cost is zero.

The survival technique, can be used to estimate short-run total variable cost functions. Is based on a technical knowledge of a firms production function. Uses regression analysis in combination with time-series or cross-sectional data. True or false

False

If a linear short-run variable cost function is estimated using cross-sectional data, then the corresponding marginal cost function will be

Horizontal

If a firm has a downward sloping long-run average cost curve, then?

It is a monopoly.

Breakeven analysis identifies the?

Level of output where economic profit is equal to zero.

If the output levels at which short-run marginal and average cost curves reach a minimum are listed in order from smallest to greatest, then the order would be?

MC, AVC, ATC.

The process whereby firms reduce their production costs by taking advantage of international differences in the prices of inputs and international similarities in preferences is referred to as the?

New international economies of scale.

Economies of scope refers to the decrease in average total cost that can occur when a firm?

Produces more than one product.

Which of the following is a variable cost?

Raw materials

Which of the following would be referred to as outsourcing?

Subcontracting production to firms in other countries.

Short-run marginal cost is equal to?

The change in total cost divided by the change in output. The change in total variable cost divided by the change in output and the cost per unit of the variable input divided by the marginal product of the variable input.

The long-run average cost curve is at a minimum at a level of output where?

The firm is experiencing constant returns to scale. It is equal to long-run marginal cost. The long-run average cost curve is tangent to the lowest point on a short-run average total cost curve.

Short-run average variable cost is equal to?

Total variable cost divided by output. Average total cost minus average fixed cost. The cost per unit of the variable input divided by the average product of the variable input.

When a firms designs a core product for the entire world that can be adapted in a number of ways to accommodate different types of markets, it is taking advantage of the?

new international economies of scale.