ECON 2113 Chapter 13
Explicit costs require an outlay of money by the firm
true
One would expect to observe diminishing marginal product of labor when crowded office space reduces the productivity of new workers.
true
The firm's efficient scale is the quantity of output that minimizes average total cost.
true
The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units.
true
When a firm is able to put idle equipment to use by hiring another worker, variable costs will rise.
true
the average fixed cost curve always declines with increased levels of output
true
total revenue equals total output multiplied by price per unit of output
true
when a firm is able to put idle equipment to use by hiring another worker, variable costs will rise
true
average variable cost
variable cost divided by the quantity of output
profit
total revenue minus total cost
economic profit
total revenue minus total cost, including both explicit and implicit costs
A total-cost curve shows the relationship between the quantity of an input used and the total cost of production
false
Average fixed costs do not vary with the amount of output a firm produces.
false
Average total cost is equal to output/total costs
false
Diminishing marginal product suggests that additional units of output become less costly as more output is produced.
false
Diminishing marginal product suggests that the marginal cost of an extra worker is unchanged.
false
Economic profit is equal to total revenue minus the explicit cost of producing goods and services.
false
If marginal cost is rising, average variable cost must be falling.
false
John owns a shoe-shine business. His accountant most likely includes wages John could earn washing windows.
false
Net profit can be added to profit to obtain total revenue
false
Suppose Jan is starting up a small lemonade stand business. Variable costs for Jan's lemonade stand would include the cost of building the lemonade stand.
false
The marginal product of an input in the production process is the increase in total revenue obtained from an additional unit of that input.
false
Those things that must be forgone to acquire a good are called substitutes
false
When marginal cost is less than average total cost, average total cost is rising.
false
fixed costs can be defined as costs that vary inversely with production
false
if a firm produces nothing, total costs will be zero
false
marginal cost must rise as the quantity of output increases
false
the cost of accounting services would be regarded as an implicit cost
false
when a firm is operating at an efficient scale, average variable cost is minimized
false
when marginal cost is rising, average variable cost must be rising
false
average fixed cost
fixed cost divided by the quantity of output
implicit costs
input costs that do not require an outlay of money by the firm
explicit costs
input costs that require an outlay of money by the firm
total revenue
the amount a firm receives for the sale of its output
marginal product
the increase in output that arises from an additional unit of input
marginal cost
the increase in total cost that arises from an extra unit of production
total cost
the market value of the inputs a firm uses in a production
economies of scale
the property whereby long-run average total cost falls as the quantity of output increases
diseconomics of scale
the property whereby long-run average total cost rises as the quantity of output increases
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
efficient scale
the quantity of output that minimizes average total cost
production function
the relationship between quantity of inputs used to make a good and the quantity of output of that good
average total cost
total cost divided by the quantity of output
accounting profit
total revenue minus explicit cost
Accountants are primarily interested in the flow of money into and out of firms.
true
At all levels of production beyond the point where the marginal cost curve crosses the average variable cost curve, average variable cost rises.
true
Average total cost is very high when a small amount of output is produced because average variable cost is high.
False
Average total cost tells us the total cost of the first unit of output, if total cost is divided evenly over all the units produced.
False
Marginal cost tells us the value of all resources used in a production process.
False
Profit is defined as net revenue minus depreciation
False
Some costs do not vary with the quantity of output produced. Those costs are called marginal costs.
False
The amount by which total cost rises when the firm produces one additional unit of output is called average cost.
False
The amount of money that a firm receives from the sale of its output is called total gross profit.
False
The efficient scale of the firm is the quantity of output that maximizes marginal product.
False
Variable cost divided by quantity produced is average total cost.
False
When adding another unit of labor leads to an increase in output that is smaller than increases in output that resulted from adding previous units of labor, we have the property of diminishing labor.
False
An example of an implicit cost of production would be the income an entrepreneur could have earned working for someone else.
True
Assume a certain firm regards the number of workers it employs as variable, and that it regards the size of its factory as fixed. This assumption is often realistic in the short run, but not in the long run.
True
For a firm that uses labor to produce output, the production function depicts the relationship between the quantity of labor and the quantity of output.
True
The amount of money that a firm pays to buy inputs is called total cost.
True
The cost of producing an additional unit of output is the firm's marginal cost.
True
The cost of producing the typical unit of output is the firm's average total cost.
True
Total cost can be divided into two types. Those two types are fixed costs and variable costs.
True
the firm can vary the number of workers it employs, but not the size of its factory, this assumption is often realistic for a firm in the short run.
True
fixed costs
costs that do no vary with the quantity of output produced
variable costs
costs that vary with the quantity of output produced
