Chapter 9- Microeconomics

fixed costs are associated with

the short run only

the law of diminishing returns indicates that

as extra units of a variable resource are added to fixed resource, marginal product will decline beyond some point

accounting profits are typically

greater than economic profits because the former do not take implicit costs into account

if you owned a small farm, which of the following would most likely be a fixed cost

hail insurance

The ABC corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that initially it was producing:

in the range of diseconomies of scale

Which of the following is correct as it relates to cost curves

marginal cost intersect average total cost at the latter's minimum point

marginal product

may initially increase, then diminish, and ultimately become negative

Production Costs to an economists

reflect opportunity costs

Marginal cost is: (basic info of question below) TFC= total fixed cost MC= marginal cost TVC= total variable cost Q= quantity of output P= product price

Change in TVC( Total Variable Cost) ---------------------------------------- Q (Quantity of output)

average fixed cost

declines continually as output increase

the short run is characterized by

fixed plant capacity

when diseconomies of scale occur

the long-run average total cost curve rises

normal profit is

the return to the entrepreneur when economic profits are zero

Refer to data. If the firm closed down in the short run and produced zero units of output, its total cost would be OutPut Average Fixed Cost Average Variable Cost 1 50 100 2 25 80 3 16.67 66.67 4 12.50 65 5 10 68 6 8.37 73.33 7 7.14 80 8 6.25 87.50

$50

An explicit cost is

a money payment made for resources not owned by the firm itself

Economic cost can best be defined as

a payment that must be made to obtain and retain the services of a resource

In comparing the changes in TC and TVC associated with an additional unit of output, we find that

both TC and TVC are equal to MC

the long run is characterized by

the ability of the firm to change its plant size

implicit and explicit costs are different in that

the former refer to non expenditure costs and the latter to monetary payments

a natural monopoly exists when

units cost are minimized by having one firm produce an industry's entire output