AP Economics Firm Profit and Costs

(Table) The average total cost of producing six bagels is:

$0.15

(Table 55-3: Costs of Producing Bagels) The marginal cost of producing the sixth bagel is:

$0.20

The optimal output rule states that profits are maximized when:

MR=MC

Figure 54-1 -- As units of labor are hired between quantities L1 and L2, __________ is ______________ and __________ is ____________.

Marginal product; zero; total product; falling

Table 54-3 -- The table shows how many cabinets your firm can make with a variable quantity of labor hired. After which worker does the firm first begin to experience diminishing returns to labor?

second

In the short run:

some inputs are fixed and some inputs are variable.

If economic profit for a firm is negative:

the firm should exit the industry in the long run

The implicit cost of capital is:

the opportunity cost of capital used by a business

The sum of fixed and variable cost is:

total cost

In the long run, all costs are:

variable

When an increase in the firm's output reduces its long-run average total cost, it experiences:

economies of scale

Bessie wants to calculate the accounting and economic profits on her cattle farm in Nebraska. She pays $30,000 per year for the cost of raising cattle, $80,000 in wages, $20,000 in insurance, and she forgoes the $30,000 per year that she could make as a teacher. If her total revenue equals $140,000, that means her accounting profit is ___________ and her economic profit is _____________

$10,000; -$20,000

WIlliam installs custom sound systems in cars. If he installs seven systems per day, is total costs are $300. If he installs eight systems per day, his total costs are $400. William will install only eight sound systems per day if the eight customer is willing to pay at least:

$100

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is:

300 bushels

You own a small manufacturing company that produces gadgets. The table shows the quanitity of gadgets that you could produce, the total cost you incur at each level of production, and the toatl benefit your customer receives at each level of production. According to the table, how many gadgets should you produce?

4

Profit computed using explicit costs as the only measure of costs is:

accounting profit

If ATC is equal to MC, then one is operating:

at the minimum point of ATC

(Figure 55-2) The vertical difference between curve B and curve C at any quantity of output is:

average fixed cost

(Figure 55-2) B is the __________ cost curve.

average total

If marginal cost is equal to average total cost, then:

average total cost is at its minimum

If marginal cost is greater than average total cost, then:

average total cost is increasing

(Figure 55-2) C is the ________ cost curve.

average variable

Figure -- Output per period in the region A to B indicates that a firm is experiencing:

constant returns to scale

The idea of diminishing returns to an input in production suggests that if a local college adds more and more custodians, the marginal product of labor for the custodial staff will __________ over time.

decrease

When AVC eventually increases as output increases, this is referred to as the _________ effect.

diminishing returns

Figure -- Output per period in the region B to C indicates that a firm is experiencing:

diseconomies of scale

An input whose quantity cannot be changed during a particular period is a(n):

fixed input

If Marie's Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

increasing

(Figure 55-2) A is the ________ cost curve.

marginal

The ______ is the increase in output obtained by hiring an additional worker.

marginal product