Microeconomics Chapter 9

If total cost rises from $300-$700 when one additional unit of output is produced, what is the marginal cost?

$400

Which of the following is an example of labor specialization?

1) Each worker may now have just one task instead of five or six. 2) Workers can work full-time on the tasks for which they have unique skills. 3) Hiring more workers means jobs can be divided and subdivided.

Which of the following contributes to diseconomies of scale?

1) Slower decision making leading to increased average total costs. 2) Opportunities to shirk by avoiding work and Increasing average total costs

If fixed costs increase,

1) The average fixed cost curve shifts upward 2) The average total cost curve shifts upward

The formula for marginal costs is:

1) The change or difference in total variable cost divided by the change or difference in output 2) The change or difference in total cost divided by the change or difference in output

What is the relationship between the law of diminishing returns in the marginal cost curve?

1) The law of diminishing returns explains the shape of the marginal cost curve 2) The shape of the marginal cost curve is a consequence of the law of diminishing returns

If the firm's total revenue is equal to its implicit and explicit costs, then the firmest said to earn

1) accounting profit 2) zero economic profit 3) normal profit

Costs exist because resources

1) are scarce 2) have alternative uses

what are the benefits of managerial specialization?

1) increased productivity 2) greater efficiency 3) lower unit costs

Which of the following are types of costs that do not vary with changes in output (i.e. fixed costs)?

1) insurance premiums 2) rental payments 3) interest on a firm's debts

Which of the following are examples of fixed costs?

1) interest on a firm's debts 2) insurance premiums 3) rental payments

Marginal cost designates the cost that:

1) is incurred by producing an additional unit 2) is saved by not producing the last unit

Which of the following resources confirm easily and quickly adjust?

1) raw materials 2) fuel 3) hourly labor

If total product is 30 andthe units of labor is 3, then the average product of labor is ___

10 units

When a firm chooses to produce the appropriate level of output, it has made:

A decision at the margin

An ___ profit is equal to the total revenue less explicit costs

Accounting

What is the difference between an accounting profit and economic profit?

Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit)

What is the definition of accounting profit?

Accounting profit is what remains after a firm has paid it's explicit costs

Which of the following are ways that industries and firms can change the amounts of inputs used in the long run?

And industry can change its overall capacity, and industry can make major complex technological production advances, and affirm can build a larger planned

Which of the following industries highlighted the pattern of declining long run total cost?

Auto Mobile, steel, and aluminum

What happens to average product on marginal product exceeds it?

Average product continues to rise

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production, a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the law of

Diminishing marginal returns

Less coordinated decision making by executives and supervisors is a worker productivity factor that leads to ___ of scale

Diseconomies

A firm's ____ costs are the explicit and implidt costs of the resources it has used

Economic

A firm's monetary payments to those who supply transportation services is an example of _____

Explicit costs

True false: economic costs equal explicit costs minus implicit costs

False

Which of the following are examples of implicit costs?

Forgone wages & forgone rent

A firm's ____ costs are the opportunity cost of using its self-owned, self-employed resources

Implicit

If you quit your job to start your own business, your forgone wages are:

Implicit cost Opportunity cost

An ____ in the price of labor results in the average variable cost, average total cost, and marginal cost curve shifting upward

Increase

As producers develop more efficient technology it ____ the productivity of all outputs

Increases

What is the primary reason for diseconomies of scale?

It is difficult for executives to efficiently control and coordinate a firm's operations as it becomes a large-scale producer

Greater _____ specialization illuminate the loss of time that occurs whenever work her shift from one task to another

Labor

What is one reason for economies of scale?

Labor specialization

Efficient capital is effective use of capital equipment that allows ____-scale producers to receive unit cost reductions based on high-volume production

Large

From the industry city point, the ____ run includes enough time for existing firms to dissolve and leave industry or for new firms to be created and enter the industry

Long

From an existing firms perspective, the ___ ____ is the time period during which it can adjust the quantities of all the inputs that it employees including plant capacity

Long run

When ___ product is zero, total product is that a maximum

Marginal

____ product is the change in total product divided by the change in labor and paint

Marginal

_____ cost equals the change or difference in total cost divided by the change or difference in output

Marginal

Firms use ____ to determine whether expansion or contraction is profitable

Marginal revenue and marginal cost

The long run average total cost curve is derived from the _____ point of tangency of each of the short run ATC curves

Minimum

Which of the following is true of economies of scale?

Productions and the average total cost of producing a product as the firm expand the size of its plant (output) in the long run

Average product of labor is also referred to as labor ___

Productivity

Economies of mass production is another term for economies of ___

Scale

A firm's plant capacity is fixed in the ___ run

Short

Firm cannot avoid paying fixed costs in the ___run

Short

Cost curves shift due to changes in either resource prices or _____

Technology

The long run average total cost curve's shape is determined by ___ and the resulting economies and diseconomies of scale

Technology

Average fixed cost equals total fixed cost divided by ____

The amount of output

If fixed costs increase

The average fixed cost curve shifts upward and the average total cost curve shifts upward

Which of the following occurs at a low level of output for small businesses such as those in retail trade and light manufacturing industries?

The minimum efficient scale

From a firm's perspective, what are economic costs?

The payments a firm must make or the incomes it must provide to attract the resources it needs away from alternative production opportunities

Which of the following defines constant returns to scale?

The unchanging average total cost of producing a product as the firm expand the size of its plant (its output) in the long run

____ cost is the sum of fixed cost and variable cost at each level of output

Total

Average total costs (ATC) could be computed using which of the following values?

Total cost and output Average fixed cost and average variable cost Total variable cost, total fixed cost, and output

The average variable cost curve is

U-shaped

A firm can directly and immediately control its marginal costs (MC) by controlling its ___ costs

Variable

Total costs, including _____ costs and marginal costs change with the level of output

Variable

Under the definition of a long run, all resources and inputs are ___

Variable

The business manager can alter ____ costs in the long run, but ____ costs are behind a managers control, are incurred in the short run and must be paid regardless of output level

Variable; fixed

When is marginal cost at its minimum?

When marginal product is at its maximum

Is the change in total cost in the change in total variable cost associated with each additional unit of output the same because the only difference between total costs and variable costs is the total fixed cost?

Yes

If total variable cost is $100, total fixed cost is $100, and output is 10, what is the average variable cost?

$10

What are the components of plant capacity?

1) size of the building 2) amount of machinery and equipment 3) other capital resources

Which of the following are types of resources that require more time for your firm to adjust, given a change in demand?

1) size of the factory 2) amount of machinery

When a firm's total revenue exceeds all of its economic costs:

1) the residual goes to the entrepreneur 2) The residual is called economic or pure profit

Which of the following are examples of variable costs?

1) transportation services payments 2) fuel costs 3) material costs

what is the average fixed cost if total fixed cost is $100, the total variable cost is $50 and output is 20?

$5

Which of the following statements explains why the average variable cost curve is U-shaped?

-at the highest levels of output, variable cost per unit increased -as output rises from the initial very low levels, greater specialization occurs, and variable cost per unit declines -at low levels of output, production is relatively inefficient and costly

What is the definition of explicit costs?

1) A firm's monetary payments made for the use of resources owned by others 2) A firm's monetary payment to those who supply labor services, materials, fuel, and transportation services

What methods can be used to calculate average total cost?

1) average fixed cost plus average variable cost 2) total cost divided by output (Q) 3) total fixed cost divided by output plus total variable cost divided by output

In general, what production characteristic implant size scale are required for efficient capital usage to be effective?

1) high production volume 2) large scale producers

Which of the following would incur an explicit cost?

1) raw materials 2) labor 3) utility usage

What Is the definition of "learning by doing"?

A firm's production efficiency and marketing expertise usually increase as production experience and output increase

What types of cost difference in Kirtland producing products?

Implicit and explicit

The ___ cost curve intersects the average total cost curve at the average total cost curve's minimum.

Marginal

Average variable cost equals total variable cost divided by total

Output

An industry with an extended range of ____ returns to scale, firms a very incises can coexist and be quite profitable

Constant

When minimum efficient scale occurs at a low level of output, what kind of producers will consumer demand support?

Consumer demand may support a large number of relatively small producers

Average total cost _____ when economies of scale exist in a firm is expanding production

Declines

Total variable costs and output have a ____ relation

Direct

Average total cost for any output level equals total cost ____ by output

Divided

Learning by doing is one of several ways to achieve ___ of scale

Economies

The use of ___ is one of several reasons large scale producers can achieve greater economies of scale

Efficient capital

To determine ____ costs, managers look for costs but in total do not vary with changes in output, whereas ____ costs are those costs that change with the level of output

Fixed; variable

In time, the growth of a firm's plant size and output may lead to ____ and ____

Higher average total costs; diseconomies of scale

The long run ATC curve also known as a planning curve shows the ____ average total cost at which any output level can be produced when the firm has had time to make all desired changes to it plant size

Lowest

The minimum efficient scale is the ___ level of output at which a firm can ____ long-run average cost

Lowest; minimize

The firm is currently producing five units at a total cost of $500. The firm is considering increasing production to six units and observes that this increase in production will cost an additional $80 versus an additional revenue of $90. This is an example of how ____ analysis helps producers make output decisions

Marginal

The _____ cost of a resource is the value or worth the resource would have and it's best alternative use

Opportunity

The paper for printing text books is not available for printing encyclopedias or romance novels. This is an example of an

Opportunity cost

___ costs are payments made by firms to attract the resources they need away from alternate production opportunities

Opportunity costs & economic costs

In the ___ run, affirm can increase its output by adding units of labor to it's fixed point

Short

Increased ____ becomes more achievable as a plant increases in size

Specialization in the use of labor

Economic costs are defined as

The value or worth a resource would have and it's best alternative use