Production costs Quiz (CC)

In the short run, a type of cost that does not change with the level of output produced is a(n) __________.

fixed cost

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

constant returns to scale

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change,

A firm produces 1,000 widgets. It sells each widget for $1. In order to calculate the firm's average profits, one would need to know _______.

total costs

Assume a firm's cost of machinery decreases. To reduce its total costs while maintaining current production levels, the firm could ________.

use more machines and less labor

Suppose a firm is currently experiencing diseconomies of scale. Over time, one would expect firm size to ______.

decrease

A factory that makes 1,000 widgets can do so at an average cost of $20 per widget. A factory that makes 2,000 widgets can do so at an average cost of $45 per widget. In this case, the market likely experiences ______.

diseconomies of scale

If the firm sells 5 units at a price of $30 each, then the marginal unit produced

is subtracting from profits.

The economies-of-scale curve is a long-run average cost curve, because

it allows all factors of production to change.

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

________________________ arises where many firms are competing in a market to sell similar but differentiated products.

Monopolistic competition

Under which of the following conditions will a firm take longer to earn significant profits, all else equal?

a firm with high fixed costs

Refer to the figure. When a firm's long run average cost curve is tangent to its short run average cost curve at a point where short run average total costs are falling, that firm is experiencing _______.

economies of scale

Which of the following is an example of an explicit cost?

materials cost

Suppose a firm wants to calculate its total revenue. In addition to quantity, it would need to know _____.

price