Micro Chapter 9

There is a ______ relationship between marginal cost and marginal product.

inverse

When total product is decreasing, marginal product ______.

is negative

average product

labor productivity, output per unit of labor input

in a natural monopoly, long run costs are _______ when only one firm produces one product.

minimized

The size of the factory, the amount of machinery and equipment, and other capital resources define its....?

plant capacity

When total product is increasing at an increasing rate, marginal product is:

rising

Economies of Scale factors

-Labor specialization -Managerial specialization -Efficient capital, better equiptment -Design, development, and advertising

Diseconomies of scale characteristics

-control and coordination problems -Communication problems -worker allienation -shirking (working getting away with not being productive)

short run

-the period of time during which at least one of a firm's inputs is fixed -period too brief to alter its plant capacity -some variable inputs; can be changes

long run

-the time period in which all inputs can be varied -firms can adjust plant size as well as enter and exit industry

Which of the following is true of average fixed cost when output increases?

Average fixed cost declines as output increases.

Which of the following is true where the marginal product curve intersects the average product curve?

Average product is at its maximum.

Marginal cost (MC)

Chang in TC / Change in Q Change in total cost / Change in Average Quantity

Total Fixed Costs (TFC)

Costs that do not vary with output.

Total Variable Costs (TVC)

Costs that do vary with output. (typically up sloping/horizontal)

A firm's ______ costs are the explicit and implicit costs of all the resources it has used .

Economic

There is NO Average ______ Cost in the Long run.

Fixed

minimum efficient scale (MES)

Lowest level of output at which long run average costs are minimized.

Average product curve can never be ______.

Negative

The Minimum Efficient Scale can determine the _______ of an industry.

Structure

Total Cost (TC)

Sum of TFC and TVC. Total cost = Total fixed cost +total variable cost

Average Total Costs (ATC)

TC / Q or AFC + AVC Total cost / Quantity or Average fixed cost / Average variable cost

Average Fixed Cost (AFC)

TFC / Q Total Fixed Cost / Quantity

Average Variable Cost (AVC)

TVC / Q Total Variable Cost/ Quantity

spreading overhead

The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises.

accounting profit

The total revenue of a firm less its explicit costs; the profit (or net income) that appears on accounting statements and that is reported to the government for tax purposes.

The AVC curve is ___ shaped.

U

normal profit

Value of entrepreneur's talent in the next best entrepreneurial activity the payment made by a firm to obtain and retain entrepreneurial ability; the minimum income entrepreneurial ability must receive to induce it to perform entrepreneurial functions for a firm

All costs in the long run are______.

Variable

If the total product is at its maximum, the marginal product is _____.

Zero

Marginal product formula

change in total product/change total labor input

The short fun and long run are _____periiods, not speciific amounts of time.

conceptual

For any average product to remain constant, marginal product must be ______ to the average products.

equal

A planning too used to analys

explicit

economic costs =

explicit costs + implicit costs

For any average product to increase, marginal product must be ______ than average product.

greater

For any average product to decline, marginal product must be ______ than average product.

less

Economies of scale explain the downward-sloping part of the ______ curve.

long-run average-total-cost

Average product declines when ______.

marginal product is less than average product

When total product is increasing, but at a decreasing rate, marginal product is:

positive, but falling

marginal product

the extra output or added product associated with adding ONE unit of a resource.

implicit costs

the monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment; includes a normal profit

explicit costs

the monetary payment a firm must make to an outsider to obtain a resource

law of diminishing returns

the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline

economies of scale

the property whereby long-run average total cost falls as the quantity of output increases

diseconomies of scale

the property whereby long-run average total cost rises as the quantity of output increases

constant returns to scale

the property whereby long-run average total cost stays the same as the quantity of output changes

economic profits

the return flowing to those who provide the economy with the economic resource of entrepreneurial ability; the total revenue of a firm less its economic costs.

plant capacity

the size of the building and amount of capital equipment

total product

the total quantity or total output of a particular good or service produced

economic cost

the value of all resources used to produce a good or service; opportunity cost

At the point on a graph where total product (Q) is zero, total cost is equal to ______.

total fixed costs

average product formula

total product/units of labor total units of output/ total units of input

economic profit =

total revenue - explicit costs - implicit costs

When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis. Multiple choice question.

vertically

When total product is at its maximum, marginal product is ____.

zero