Chapter 9- Production

Which of the following inputs is NOT considered variable in the short run?

All of these answers - Wrenches used in an auto mechanic shop - Unused warehouse space - Electricity supplied to a manufacturing plant

Which of the following situations would contribute to economic profit earned in uncompetitive markets?

All of these answers - Collusion between firms to set the market price - An oligopolist setting the price of a good above the market equilibrium - Licensing regulations that prevent entry of new firms in the market

Factory A is able to produce 1,000 units of output at a cost of $10,000 and 2,000 units of output for $22,000. What is Factory A experiencing?

Diminishing returns to scale

How do economic profit and accounting profit differ?

Economic profit includes implicit (opportunity) costs and accounting profit does not.

Which of the following are variable costs?

Employee wages and raw materials

Total cost is equal to ________.

Fixed cost plus variable cost

Suppose you own a profitable tailoring company that hires two workers who can make ten shirts per day combined. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting __________.

Increasing returns to scale

Which of the following is NOT true about long run costs?

Long run costs have fixed factors of production.

Economic costs include _______________.

accounting costs plus opportunity costs

The law of diminishing returns states that __________.

adding more of one factor of production eventually yields in smaller increases in output