Microeconomics CH 7 Homework

___________________ tells a firm whether it can earn profits given the price in the market.

average cost

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

Total cost incorporates:

implicit and explicit cost

In microeconomics, the term ________________ is synonymous with economies of scale.

increasing returns to scale

___________________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

total revenue

It is true that ____________ include all of the costs of production that increase with the quantity produced.

variable costs

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals:

whether the firm is earning profit if fixed costs are left out of the calculation

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

$2.43

Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000, and became a street food vendor. She used $8,000 out of her savings account that paid a 4% annual interest rate to buy a street cart to sell food. In her first year of operations, she spent $10,000 on food and supplies (napkins, cups, plates, etc.) and earned total revenue of $45,000. Marcie's accounting profit is ______ and economic profit is ______.

$35,000; $6,680

The table below sets out cost information for the production of volley balls. Some of the missing values are represented by bold-face letters (A-G). Which of the following statements is correct?

A= 42; E=12

Again, using the table above, which of the following statements is correct?

all of the above

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will:

do so regardless of what type of competition exists in a market

The phrase ________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

When __________________ exist, doubling of all inputs will result in more than doubling output, which means __________________________________________.

economies of scale; a larger factory can produce at a lower average cost than a smaller company

"Constant returns to scale" describes a situation where:

expanding all inputs does not change the average cost of production

Refer to the table below. If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits of losses equal?

losses equal $15

The term_____________ is used to describe the additional cost of producing one more unit.

marginal cost

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

marginal returns

In their calculation of profit, accountants typically do not take into account:

opportunity costs

Firms will enter and industry when the:

price rises above the minimum of the average total cost curve

Refer, again, to the table above. If the firm produces 6 unites that it sells for $35.00 each, what will its profits or losses equal?

profits equal $5