Topic 8: Production

Suppose a snowboard manufacture 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 $___.

$10

Which of the following is true of economic costs?

Economic costs are defined as the sum of explicit and implicit costs.

Business operating decisions should be based on _____ profit.

economic

Increasing marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is _____ than that of the previous variable resource.

greater

Which of the following is a way that firms can avoid paying fixed costs in the short run?

Firms cannot avoid fixed costs in the short run.

Which of the following is true of the shape of the marginal cost curve?

It is U-shaped.

_____ cost equals total fixed cost plus total variable cost.

Total

Total revenue minus the explicit cost of production is _____ profit.

accounting

The fixed cost per unit is equal to:

average fixed cost.

The vertical distance between the average variable cost and the average total cost curves is equal to the

average fixed cost. AFC = ATC - AVC

Total cost per unit is equal to:

average total cost. ATC = TC/Q or AFC + AVC

Total variable cost divided by the amount of output produced is equal to:

average variable cost. AVC = TVC/Q

Variable cost per unit of output produced is:

average variable cost. AVC = TVC/Q

Positive _____ profits encourage more firms to enter the market to produce goods and services.

economic

Total revenue minus the explicit and implicit cost of production is _____ profit.

economic

Monetary payments made by individuals, firms, and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____ costs.

explicit

Total revenue minus the total _____ cost of production is accounting profit

explicit

The marginal cost is the:

extra or additional cost associated with the production of an additional unit of output.

Costs for which no monetary payment is explicitly made are _____ costs.

implicit

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.

marginal

The additional output produced as a result of utilizing one more unit of a variable resource is called

marginal product

The _____ costs of using owned resources are implicit costs.

opportunity

Total _____ equals price times quantity.

revenue

A period of time in which at least one input of production is fixed is known as the _____ run.

short

Costs that change with the amount of output produced are _____ costs.

variable

Costs that increase as production increases and decrease as production decreases are _____ costs.

variable

The marginal cost curve must intersect both the average _____ cost and average _____ cost curves at their respective minimum points.

variable; total

The total amount of output produced with a give amount of resources is known as

total product

Costs that do not change with the amount of output produced are _____ costs.

fixed