Economics Exam 3
T/F: Average total cost reveals how much total cost will change as the firm alters its level of production
False
T/F: Diseconomies of scale often arise because higher production levels allow specialization among workers
False
T/F: Economists normally assume that people start their own businesses to help society maximize its income
False
T/F: If the marginal cost curve is rising, so is the average total cost curve
False
T/F: The average total cost curve is unaffected by diminishing marginal product
False
T/F: The fact that many decisions are fixed in the short run but variable in the long run has little impact on the firm's cost curves
False
T/F: The shape of the total cost curve is unrelated to the shape of the production function
False
T/F: Variable costs equal fixed costs when nothing is produced
False
T/F: When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale
False
T/F: When economists speak of a firm's costs, they are usually excluding the opportunity costs
False
An example of an implicit cost of production would be
the income an entrepreneur could have earned working for someone else
one of the most important properties of cost curves is that
the marginal cost curve eventually rises with the quantity of output
T/F: Diminishing marginal product exists when the total cost curve becomes flatter as output increases
False
T/F: Fixed costs are those costs that remain fixed no matter how long the time horizon is
False
T/F: Diminishing marginal product exists when the production function becomes flatter as inputs increase
True
T/F: When trying to understand the decision making process of different firms, economists assume that people think at the margin
True
T/F: Accountants keep track of the money that flows into and out of firms
True
T/F: Accountants often ignore implicit costs
True
T/F: As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production
True
T/F: Average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost
True
T/F: Average variable cost is equal to total variable cost divided by quantity of output
True
T/F: Because of the greater flexibility that firms have in the ling run, all short-run curves lie on or above the long-run curve
True
T/F: Fixed costs are incurred even when a firm does not produce anything
True
T/F: The cost of producing an additional unit of a good is not the same as the average cost of the good
True
T/F: The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve
True
T/F: The shape of the marginal cost curve tells a producer something about the marginal product of her workers
True
T/F: Variable costs usually change as the firm alters the quantity of output produced
True
Specialization among workers occurs when
each worker is allowed to perfect one particular task
Some costs do not vary with the quantity of output produced. Those costs are called
fixed costs
total cost can be divided into two types. those two types are
fixed costs and variable costs
the long-run average total cost curve is always
flatter than the short-run average total cost curve, but not necessarily horizontal
the length of the short run
is different for different types of firms
when a factory is operating in the short run,
it cannot adjust the quantity of fixed inputs
Economies of scale occur when
long-run average total costs fall as output increases
Economists normally assume that goal of a firm is to
maximize profit
Variable cost divided by the quantity produced is
none of the above are correct
The marginal product of an input in the production process is the increase in
quantity of output obtained from an additional unit of that input
a total-cost curve shows the relationship between the
quantity of output produced and the total cost of production
If a firm produces nothing, which of the following costs will be zero?
variable cost
Marginal cost tells us the
amount by which total cost rises when output is increased by one unity
Which of the following statements about costs is correct?
as the quantity of output increases, marginal cost eventually rises
the firm's efficient scale is the quantity of output that maximizes
average total cost
average total cost tells us the
cost of a typical unit of output, if total cost is divided evenly over all the units produced
Economic profit is equal to
total revenue-(explicit costs+implicit costs) total revenue-opportunity costs
