ECO MOD 7
Total cost per unit is equal to:
average total cost.
Diseconomies of scale is a condition in which the long
-run average total cost of production increases as production increases.
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 The total cost of the firm will be $1,750 if the firm produces the 11th11th air conditioner. We calculate this by adding the marginal cost of the 11th11th unit to the total cost of producing 10 units. 1500 +250 =1750
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 $
1.000
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 implicit costs are $
30,000
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 accounting profit is $
40,000
The table below shows the production cost information for Raincoat, Inc. What is the total cost of production associated with the 3rd raincoat? Raincoats, Total Cost, Marginal Cost 0, 50.00, - 1, 55.00, $5 2, 57.50, $2.50 3, ?, 5.00
62.50 Reason: The total cost of production is calculated by adding the marginal cost of producing the 3rd3rd coat to the total cost of producing the 2nd2nd. The total cost of producing 3 coats is $62.50 ($5.00 + $57.50).
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 $
90,000
The information below shows the relationship between the number of workers and the amount of computer chips they can produce. Labor 0 1 2 3 4 Total Product 0 100 250 450 550 What is the marginal product of the second worker?
Reason: The marginal product of the second worker is calculated as the change in total product divided by the change in the number of workers. Moving from the first to the second worker total product increases from 100 units to 250 units, a difference of 150 computers. The marginal product is 150 (150 units / 1 worker). Found by going from total product of 250-100 = 150
Long-run average total cost curve relates to the
Short-run average total cost curves for different plant configurations.
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. When output is reduced the LRATC falls. This occurs if the firm is experiencing diseconomies of scale.
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 short run is:
a period of time in which at least one input of production is fixed.
In addition to total cost, it is useful to calculate ______ cost because it is more useful for managing.
average
Marginal values drive
average
Total product divided by the number of units of a resource employed gives the ____ product of the resource.
average
The fixed cost per unit is equal to:
average fixed cost
Total variable cost divided by the amount of output produced is equal to:
average variable cost.
The average fixed cost curve:
decreases for all levels of output
The marginal cost curve is:
decreasing for low levels of output, then begins increasing. The marginal cost curve begins by decreasing, but eventually diminishing marginal returns causes the marginal cost to increase for higher levels of output.
For quantities occurring before the marginal cost curve and average total cost curve intersect, the average total cost curve will be:
decreasing. For quantities before the intersection point, ATC will decrease. At the intersection of MC and ATC, ATC will be at its minimum. For quantities beyond the intersection ATC will increase.
Total revenue minus the total _____ costs of production is accounting profit.
explicit
Monetary payments made by individuals, firms ,and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____ costs.
explicit / accounting
Total revenue minus the total _____ and total _____ costs of production is economic profit.
implicit; explicit
Constant returns to scale occur when:
long-run average total cost does not change as output increases.
The lowest level of output at which the long-run average total cost is minimized is called:
minimum-efficiency scale.
economies of scale is
of scale is a condition in which the long-run average total cost of production decreases as production increases.
costs of using owned resources are implicit costs.
opportunity
Costs that do not change with the amount of ____ produced are fixed costs.
output or product
Decreasing marginal returns
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.
Increasing marginal returns
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.
Economic profit consists of _____; accounting profit consists of _____.
revenue minus implicit and explicit costs; revenue minus explicit costs
The long run is:
that period of time in which all factors of production are variable
Marginal product is the:
the additional output produced as a result of utilizing one more unit of a variable resource
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 implicit costs include:
the owner's forgone salary.
The short run is a period of time in which:
the quantity of at least one factor of production is fixed
Total product is:
the total amount of output produced with a given amount of resources
The price of a good times the quantity sold equals:
total revenue.
The long-run average total cost curve is generally
u shaped
Costs that change with the amount of output produced are
variable costs
Which of the following is a source of economies of scale for a firm?
An increase in the specialization of labor
What are the appropriate labels for Curves N and M in the nearby graph? * look at written graph
Curve N is total cost and Curve M is total variable cost. The total cost curve lies above the total variable cost curve by the amount of the fixed cost. Since Curve N lies above Curve M by the same amount for all levels of output, it is the total cost, while the upward sloping Curve M is the total variable cost. Curve L is fixed at the same cost for all output, it is the fixed cost curve.
Which of the following is true of economic costs?
Economic costs are defined as the sum of explicit and implicit costs.
Total cost divided by the amount of output produced is equal to:
average total cost.
Total revenue minus the explicit and implicit costs of production is _____ profit.
economic
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.
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 $
10 Found by 110-100
The information below shows the relationship between the number of workers and the amount of computer chips they can produce. Labor 0 1 2 3 4 Total Product 0 100 250 450 550 What is the average product when there are two workers?
125 Found by dividing the total product by the two workers 250/2 = 125 AKA average
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 $
25
Total revenue minus the explicit cost of production is _____ profit.
accounting
Total fixed cost divided by the amount of output produced is equal to:
average fixed cost.
The amount of output produced per unit of a resource employed is the
average product
Total product divided by the number of units of a resource employed gives the
average product of the resource
The marginal cost curve must intersect both the average variable cost
average total cost curves at their respective minimum points
A curve showing the lowest
average total cost possible for any given level of output when all inputs of production are variable is the long-run average cost curve.
A condition in which the long-run average total cost of production remains constant as production increases is called:
constant returns to scale.
Total cost
equals total fixed cost plus total variable cost. (Answer in one word)
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 is the:
extra or additional cost associated with the production of an additional unit of output.
When marginal cost is less than average cost, average cost:
falls
The average total cost curve is:
greater than the average variable cost curve for all levels of output. The average total cost is the sum of the average variable cost and the average fixed cost. The average total cost curve will always be greater than the average variable cost by the amount of average fixed cost.
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 short-run average cost curve.
The cost associated with an additional unit of output is called
marginal
The extra or additional cost associated with the production of an additional unit of output is the
marginal cost
The marginal cost curve shows the relationship between:
marginal cost and output. Reason: The marginal cost curve is graphed as 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. Reason: The minimum AVC occurs at the intersection of the MC and AVC curves. If MC is greater than AVC, AVC is increasing. If MC is less than AVC, AVC is decreasing.
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are
variable is the long-run average cost curve
Total _____ costs change with output whereas total _____ costs do not.
variable; fixed
