Chapter 11: Output and Costs Study Modules

__________ is the additional cost to the firm of producing one more unit of a good or service.

Marginal cost

What is the name for the additional output that a firm produces as a result of hiring one more worker?

Marginal product of labor

According to the data in the table, what is the marginal cost of producing the 640th pizza?

$43.33

According to the table, what is the average total cost of producing 550 pizzas?

$5.00

According to the graph, which level of output represents the minimum efficient scale in bookselling?

20,000 books

According to the graph, over what range of output do we find constant returns to scale in bookselling?

Between 20,000 and 40,000 books

According to the graph, what size bookstore is more likely to experience diseconomies of scale?

Bookstores that sell more than 80,000 books per month

Based on the relationship between average total cost and marginal cost, which of the curves appears to be average total cost?

Curve 2

Based on the relationship between marginal and average product, which curve appears to be the average product curve?

Curve 2

According to the graph, which of the following is more likely to occur when moving from point A to point B?

Diminishing returns

In the short-run, the cost that is independent of the amount of output produced is called __________.

Fixed cost

Which graph is representative of a typical average total cost curve?

Graph B

Which of these costs are affected by the level of output produced?

Variable costs

According to the table of data, when do diminishing returns in the production of pizzas begin?

When the third worker is hired

The relationship between the quantity of labor and the maximum output attainable is shown in:

a product schedule

Minimum efficient scale is the level of output at which:

all economies of scale have been exhausted

When a firm is able to lower long-run average costs by increasing output, it is known as:

an economy of scale

The short run is a period of time where __________ while the long run is a period of time where __________.

at least one factor of production is fixed, all factors of production are variable

ABC Energy company leased the mineral rights to drill for oil and gas on 10,000 acres for $500,000. Now the firm is trying to determine whether the cost to drill the well is justified given the poor results on nearby acreage. The $500,000 should be __________ for the purpose of this decision.

considered a sunk cost and ignored

A(n) __________ occurs when long-run average costs increase with output.

diseconomy of scale

The downward sloping part of the long run average total cost curve is where the firm is achieving:

economies of scale

When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:

increasing

When graphing a conventional short-run total product curve, we place __________ on the horizontal axis and __________ on the vertical axis.

labor, output

The law of diminishing returns applies in:

the short run

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?

As a part of fixed cost

What is occurring from the origin up until point A in this graph?

Output increases at an increasing rate.

According to the graph, which change in output represents economies of scale in bookselling?

from 1,000 to 20,000 books sold per month