Production Adaptive Learning
A condition in which the long-run average total cost of production remains constant as production increases is called:
constant returns to scale.
A company currently producing 10 air conditioners each day has daily total costs of $1,500. Producing an additional air conditioner will increases costs by $250 daily. What are the total daily costs for the firm if they produce the 11th air conditioner?
$1,750
(Average fixed cost + average variable cost) =
Average total cost
Monetary payments made by individuals, firms ,and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____ costs.
Explicit
Which of the following is a way in which firms can avoid paying fixed costs in the short run?
Firms cannot avoid fixed costs in the short run.
The additional output produced as a result of utilizing one more unit of a variable resource is the ________ product. (Answer in one word.)
Marginal
A firm is planning to increase output in the long run from 100 units to 200 units. The long run average total cost falls from $25 to $20. What can be said about this level of output?
The firm is experiencing economies of scale.
The shape of the long-run average total cost curve can differ for different types of firms. (True or False)
True
Total revenue minus the explicit cost of production is _____ profit.
accounting
When the marginal cost is above the average cost, the __ cost should be increasing.
average
Average total cost equals:
average fixed cost plus average variable cost
The fixed cost per unit is equal to:
average fixed cost.
Total fixed cost divided by the amount of output produced is equal to:
average fixed cost.
Total cost divided by the amount of output produced is equal to:
average total cost.
Total cost per unit is equal to:
average total cost.
Variable cost per unit is equal to:
average variable cost
The average fixed cost curve:
decreases for all levels of output.
The marginal cost is the:
extra or additional cost associated with the production of an additional unit of output.
The shape of the long-run average total cost curve can differ for different types of firms depending on:
how much production it takes to reach the minimum long-run average total cost.
The average product curve is:
increasing before reaching its peak, then decreasing.
One reason for diseconomies of scale is:
increasing opportunity costs.
One potential reason diseconomies of scale could exist is that:
inputs are not as productive as the inputs used before.
If a company decides to produce zero units of output,:
it still has to pay fixed costs of production.
The shape of the marginal cost curve is dependent on the:
law of diminishing marginal returns.
When deciding whether to keep production at the current level of output or produce more, a firm will need to compare the:
marginal cost and marginal benefit.
The marginal cost curve shows the relationship between:
marginal cost and output.
When examining the cost curves for a firm, the minimum average variable cost occurs at the output level where:
marginal cost equals average variable cost.
A profit-maximizing firm should produce a level of output where:
marginal revenue equals marginal cost.
The long-run average total cost curve of a firm is plotted using the firm's:
minimum short-run average cost for each level of output.
The fixed cost curve is:
perfectly horizontal, while total variable cost curve is upward sloping.
Total revenue equals:
price times quantity.
A period of time in which at least one input of production is fixed is known as the:
short run.
Total product is:
the total amount of output produced with a given amount of resources.
Any time you give up the opportunity to use the resource for something else
there is an opportunity cost
Being able to calculate total product average product and marginal product is important:
to operate efficiently and maximize profits.
Total cost equals:
total fixed cost plus total variable cost.
Costs that change with the amount of output produced are _____ costs.
variable
Total _____ costs change with output whereas total _____ costs do not.
variable; fixed
The total amount of output produced with a given amount of resources is known as the total ________.
Blank 1: product
Total variable cost divided by the amount of output produced is equal to:
average variable cost.
Variable cost per unit of output produced is:
average variable cost.
The variable cost curve, at each output level, falls:
below the total cost curve by the amount of the fixed cost curve.
One potential reason diseconomies of scale could exist is that a firm:
cannot perfectly replicate its production when it expands.
Economic costs can be defined as the sum of _____ and _____ costs.
implicit; explicit
Total revenue minus the total _____ and total _____ costs of production is economic profit.
implicit; explicit
Minimum-efficiency scale refers to the:
lowest level of output at which the long-run average total cost is minimized.
Costs that do not change with the amount of _____ produced are fixed costs.
output
The additional output produced as a result of utilizing one more unit of a variable resource is called:
marginal product.
Which of the following is a source of economies of scale for a firm?
An increase in the specialization of labor
Suppose a snowboard manufacturer increases its output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $100 to $110. The marginal cost of producing an extra snowboard is $________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 10 or 10.0
The amount of output produced per unit of a resource employed is the ________ product. (Answer in one word)
Blank 1: average
A person who has been managing a dry cleaning store for $30,000 per year decides to open her own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The revenues of the store during the first year of operation are $100,000. The total economic profit is $________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 10000 or 10,000
Suppose a snowboard manufacturer increases it output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $120 to $145. The marginal cost of producing an extra snowboard is $________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 25 or 25.0
________ returns to scale occurs when long-run average total cost does not change as output increases.
Blank 1: Constant
Total product divided by the number of units of a resource employed gives the ________ product of the resource. (Use one word for the blank.)
Blank 1: average
When the marginal product increases, the marginal ________ declines. (Use one word for the blank.)
Blank 1: cost
Economies of scale is a condition in which the long-run average total cost of production ________ as production increases.
Blank 1: decreases, falls, declines, drops, lowers, reduces, or lessens
Explicit costs are also known as ________ (direct/opportunity) costs. (Choose an option from the ones given within parenthesis.)
Blank 1: direct
Positive ________ profits encourage more firms to enter the market to produce goods and services.
Blank 1: economic
Total revenue minus the explicit and implicit costs of production is ________ profit. (Use one word to answer.)
Blank 1: economic
An opportunity cost is associated with any cost whether it is an ________ cost or an ________ cost. (Enter one word in each blank.)
Blank 1: implicit Blank 2: explicit
Diseconomies of scale is a condition in which the long-run average total cost of production ________ as production increases.
Blank 1: increases or rises
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable is the ________ -run average cost curve. (Enter only one word in the blank.)
Blank 1: long
A period of time in which all inputs of production are variable is the ________ run. (Use one word for the blank.)
Blank 1: long
Diseconomies of scale is a condition in which the ________-run average total cost of production increases as production increases.
Blank 1: long
The ________-run average total cost curve relates to the ________-run average total cost curves for different plant configurations.
Blank 1: long Blank 2: short
A period of time in which at least one input of production is fixed is known as the ________ (short/long) run. (Choose your answer from the options given in the brackets)
Blank 1: short
A period of time in which at least one input of production is fixed is known as the ________ run. (Use one word for the blank.)
Blank 1: short
Being able to calculate ________ product, average product, and marginal product is important to operate efficiently and maximize profits.
Blank 1: total
The average fixed cost always declines with additional output while the average _________ and average ________ costs decline and then increase.
Blank 1: total Blank 2: variable
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are ________ (variable/fixed) is the long-run average cost curve.
Blank 1: variable
Costs that change with the amount of output produced are ________ (variable/fixed) costs.
Blank 1: variable
Total ________ costs change with output, whereas total ________ costs do not.
Blank 1: variable Blank 2: fixed
The marginal cost curve must intersect both the average ________ cost and average ________ cost curves at their respective minimum points.
Blank 1: variable Blank 2: total
The vertical distance between the average ________ cost and the average ________ cost curves should get smaller as more output is produced.
Blank 1: variable Blank 2: total
Which of the following is true of economic costs?
Economic costs are defined as the sum of explicit and implicit costs.
A firm is reducing their output from 2,000 units to 1,000 units. This decision results in a reduction in the long run average cost from $300 to $200. What can be said about this firm?
The firm is experiencing diseconomies of scale.
The costs associated with the use of resources are called:
economic costs.
A condition in which the long-run average total cost of production decreases as production increases is called:
economies of scale.
In addition to total cost, it is useful to calculate ________ cost because it can be compared directly to the price. (Enter one word in the blank.)
Blank 1: average
In addition to total cost, it is useful to calculate ________ cost because it is more useful for managing. (Enter only one word in the blank.)
Blank 1: average
Zero accounting profit means that the value of economic profit is ________.
Blank 1: negative
A curve showing the average total cost for different levels of output when at least ________ input of production is fixed typically plant capacity is the short-run average cost curve.
Blank 1: one, some, or 1
The ________ costs of using owned resources are implicit costs.
Blank 1: opportunity
Costs that do not change with the amount of ________ produced are fixed costs.
Blank 1: output, product, units, or outputs
Total ________ equals price times quantity. (Use one word for the blank.)
Blank 1: revenue
The true cost of an economic activity such as the production of goods and services must include:
implicit cost
The vertical distance between the average variable cost and the average total cost curves is equal to the:
average fixed cost.
The vertical distance between the average variable cost and the average total cost curves is equal to:
average fixed cost.
Because the cost of a container is proportional to its surface area, by doubling the diameter of a container, a producer can:
experience economies of scale.
The marginal cost curve is:
decreasing for low levels of output, then begins increasing.
Total cost equals total ________ cost plus total ________ cost. (Remember enter only one word per blank.)
Blank 1: fixed Blank 2: variable
Costs for which no monetary payment is explicitly made are ________ costs.
Blank 1: implicit
When the marginal product increases, the marginal cost of production ________.
Blank 1: falls, declines, decreases, or lowers
Average ________ cost always declines as a firm produces more output.
Blank 1: fixed
For quantities occurring before the marginal cost curve and average total cost curve intersect, the average total cost curve will be:
decreasing.
A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The explicit costs are $________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 60000 or 60,000
A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The total economic cost is $________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 90000 or 90,000
________ marginal returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
Blank 1: Decreasing or Diminishing
________ profit consists of revenue minus implicit and explicit costs.
Blank 1: Economic
________ marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.
Blank 1: Increasing
________ (Negative/Zero) economic profits encourage firms to exit the market.
Blank 1: Negative
Total revenue minus the explicit cost of production is ________ profit.
Blank 1: accounting
Zero ________ profit means your revenues are covering not only all the monetary payments you have to make but also all of your implicit costs.
Blank 1: economic
The lowest level of output at which the long-run average total cost is minimized is called minimum ________ scale. (Enter one word in the blank)
Blank 1: efficiency or efficient
A firm incurs ________ costs when it pays for a factor of production at the same time that it uses it, whereas ________ costs are the costs associated with a firm's use of resources that it owns. (Enter one word in each blank.)
Blank 1: explicit Blank 2: implicit
To determine the true cost associated with the production of goods or services, ________ (implicit/average) costs should be taken into account.
Blank 1: implicit
A curve showing the ________ average total cost possible for any given level of output when all inputs of production are variable is the long-run average cost curve.
Blank 1: lowest, minimum, or smallest
Decreasing ________ returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
Blank 1: marginal
Increasing ________ returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.
Blank 1: marginal
The extra or additional cost associated with the production of an additional unit of output is the ________ cost.
Blank 1: marginal
A curve showing the average total cost for different levels of output when at least one input of production is fixed typically plant capacity is the ________-run average cost curve.
Blank 1: short