ECO 12

Implicit costs are

costs that represent forgone opportunities

Explicit costs are

costs that require a firm to spend money. costs that include just about everything we typically think of as a cost.

Average total cost is rising when

MC > ATC.

______ costs depend on the quantity of output produced.

Variable

Variable costs

depend on the quantity of output produced.

Suppose Drink Well produces flavored water in a permanently rented space using their private well, purchased bottles, and hired hourly labor. They buy advertising services from a marketing company for a flat annual fee. Their variable costs include

labor, water, and bottles.

If the marginal cost of increasing production by one unit is ________ than your current average total cost, then producing that extra unit will decrease your average total cost. Listen to the complete question

less

The long run is any period over one year.

False

The slope of the total cost curve decreases because of the principle of diminishing marginal product.

False

Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of it 10 workers $2,500 a month and spends $5000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each.Their total cost is

$35,000.

Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of it 10 workers $2,500 a month and spends $5,000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each.Their average variable cost per month per sandwich, rounded to the nearest penny, is

$8.57

Suppose you are able to produce 50 basketballs. Hiring another employee enables you to produce 65 basketballs. The marginal product of the added worker is _____ basketballs.

15

Suppose with 5 workers you can produce 100 picture frames. With 6 workers you can produce 125 picture frames. The marginal product of the added worker is _______ picture frames

25

The change in total cost divided by the change in the quantity of output is the

arginal cost.

The relationship between the quantity of output and average total cost is described by

economies of scale, diseconomies of scale, and constant returns to scale.

Average fixed cost = ______ cost/quantity of output.

fixed

The average ______ cost curve trends downward because as production increases, the cost per unit of production decreases.

fixed

The minimum of the average total cost curve occurs at a higher output level than the minimum of the average variable costs curve because the average _____ cost is lower than the average ______ cost and this pulls the average total cost down.

fixed variable

Explicit costs include

fixed and variable costs.

Average fixed cost equals

fixed cost divided by quantity of output.

Total costs =

fixed costs + variable costs

Suppose Drink Well produces flavored water in a rented space using their private well, purchased bottles, and hired hourly labor. They buy advertising services from a marketing company for a fee based on sales. Their fixed costs include

rent.

The amount that a firm receives from the sale of goods and services is its total ______

revenue

The cost of a lease (or any input) is fixed in the ______ run, but not fixed in the __ run

short long

Marginal product is represented by the ______ of the total production curve.

slope

Total revenue is the quantity

sold multiplied by the price paid per unit.

In business, people frequently say, "It's all about the bottom line." What they mean by this is

that making a profit is the central goal of a business.

When a firm could achieve economies of scale by expanding,

the ATC curve decreases as output increases.

When a firm realizes diseconomies of scale by expanding

the ATC curve increases as output increases.

A firm's first few employees tend to have increasing marginal product. At some point, the principle of diminishing marginal product kicks in. As a result,

the average total cost curve is U-shaped.

Average total cost equals

total cost divided by quantity.

The quantity sold multiplied by the price paid per unit is

total revenue

Average variable cost = Total ____ variablecost/quantity of output.

variable

Average variable cost equals

variable cost divided by quantity of output.

The relationship between the quantity of output and average total cost is described by which of the following?

Economies of scale Constant returns to scale Diseconomies of scale

______ costs are costs that require a firm to spend money _______costs do not require a firm to spend money or take on obligations. Listen to the complete question

Explicit Implicit

_________ costs are what you give up in order to get something.

Implicit

Fixed costs are those that

don't depend on the quantity of output produced.

Economists think of the long run as being the period of time

during which a firm can vary all of its inputs and their costs.

If a small firm finds that operating on a larger scale enables it to lower its average cost, then the firm is facing

economies of scale.

When economists think about a firm's costs, they are thinking about everything the firm

gives up in order to produce output.

When output is very low, each additional worker has a _______ marginal product than the last one; but when more workers are added the marginal product starts to ___________

higher decrease

The average variable cost curve has its shape because, initially, the first few employees demonstrate _____ marginal product causing the average variable cost curve to slope ________) but when the principle of diminishing marginal product kicks in, the curve slopes

increasing downward upward

The production function shows the relationship between the quantity of _______ and the quantity of outputs.

inputs

Because initially the first few employees have an increasing marginal product but eventually the principle of diminishing marginal product kicks in, the average variable cost curve

is U-shaped.

Marginal cost is the

change in total cost ÷ the change in the quantity of output.

The marginal cost is the

change in total cost ÷ the change in the quantity of output.

The relationship between the quantity of inputs and the quantity of outputs is the __________ function

production

When people refer to the bottom line, they are referring to the company's _______ which is shown on the bottom line in a company's income statement.

profit

The principle of diminishing ______product states that the marginal product of an input decreases as the quantity of the input increases. Listen to the complete question

marginal

When a firm faces constant returns to scale,

an increase in the quantity of output does not change the average total cost.

If the marginal cost of increasing production by one unit is more than your current average total cost, then average total cost of producing that extra unit __________

increases

From looking at a graph of the production function, you can see that the marginal product initially ________ when the first few workers are added; but then it begins to __________

increases decrease

Diseconomies of scale are returns that occur when an increase in the quantity of output

increases average total cost.

The change in total cost divided by the change in the quantity of output is called

marginal cost.

Total revenue minus explicit costs is

accounting profit.

The marginal cost is the ________ cost that will be incurred by producing one additional unit of

additional output

Suppose Event Photo Services takes photographs at private events with cameras they purchased. They process the photos in a rented space and hire hourly labor to arrange shoots and produce the finished photo packages. They buy advertising services from a marketing company for a flat annual fee. Their fixed costs include

advertising, rent, and cameras.

If a small firm finds that operating on a larger scale causes its average cost to stay the same, the firm is facing

constant returns to scale.

The principle of diminishing marginal product states that the marginal product of an input

decreases as the quantity of the input increases.

If a small firm finds that operating on a larger scale causes its average cost to increase, the firm is facing

diseconomies of scale.

The average fixed cost curve trends downward because the

fixed costs remain the same as production increases.

Costs that don't change as output increases or decreases are called

fixed costs.

Suppose Event Photo Services takes photographs at private events. They process the photos in a permanently rented space and hire hourly labor to arrange shoots and produce the finished photo packages. They buy advertising services from a marketing company for a fee based on sales. Their variable costs include

labor and advertising.

When a firm realizes economies of scale, it can

lower its average cost by producing more output.

The increase in the number of units of a product that can be produced by hiring an additional employee is called the______ product of that employee.

marginal

The increasing slope of the total cost curve reflects the principle of diminishing ___________product.

marginal

When economists think about a firm's costs, they are thinking about ___________

opportunity costs.

The marginal product of any input into the production process is the increase in ________ that is generated by an additional unit of the input.

output

The production function shows the relationship between the

quantity of inputs and the quantity of outputs.

Economies of scale, diseconomies of scale, and constant returns to scale describe the relationship between the

quantity of output and average total cost.