ECON 2302 Ch. 7 and 8
firm and producer
A _______ uses inputs of labor, capital, land, and raw or finished component materials to produce outputs. Select the two correct answers below.
implicit cost
A cost that is not directly paid out of pocket is an _______.
diseconomies of scale
A firm finds that producing 30,000 vases costs $180,000 and producing 40,000 vases costs $280,000. This pattern might be explained by ___________________.
economies of scale
A firm was producing 20,000 units of output at the total cost of $40,000. It now produces 30,000 units and the corresponding total cost is $50,000. This firm is experiencing ____________________.
false
Constant returns to scale occur when the long-run average cost of producing each individual unit increases as total output increases.
$140,000
Ebon open up a small coffee shop which earned him $175,000 in total revenue the first year. To do this, Ebon had to quit his previous job as a barista where he earned $25,000 per year. Ebon calculated his economic profit to be $10,000, but he wants to know what his explicit costs were. What are Ebon's explicit costs?
explicit
Employee wages and rent are examples of ______ cost.
false
Exit occurs in response to increased industry profits.
all
Factors of production or inputs include __________.
true
Firms make decisions regarding how to operate based on an industry's market structure.
false
Fixed costs increase or decrease with changes in output.
its long-run average total costs will fall
If a firm is experiencing economies of scale in its production process, which of the following will occur when the firm increases its output?
true
If a firm is unable to cover its fixed costs in the long-run, then the firm must exit the market.
true
If the production process for a product is too costly, a firm can choose to shut down production.
false
In a constant cost industry, the supply curve is said to be inelastic.
exit, enter
In a perfectly competitive market, a decrease in demand will cause firms to ______ the market in the short run and ______ the market in the long run.
true
In a perfectly competitive market, if firms are initially making zero profit and then the price of the good the firms sell rises, all else being equal, new firms have an incentive to enter the market.
false
In a perfectly competitive market, there are limited amounts of buyers and sellers in the industry.
constant cost
In a(n) ______ industry, an increase in market demand and price will result in a rightward shift in supply, new firms will enter, and supply will stop at the point where the new long-run equilibrium intersects at the previous market price.
when the LRATC decreases as quantity increases
In which of the following scenarios will economies of scale occur?
false
Production is limited only to the manufacturing of goods.
-a perfectly competitive market is in long-run equilibrium -an economy is operating on its production possibilities curve -price equals minimum average total cost
Productive efficiency occurs when _______.
true
The difference between accounting and economic profit are implicit costs.
true
The production function answers the question "how much output can the firm produce given different amounts of inputs?"
total cost
The sum of the fixed plus variable costs is known as _________.
true
To find average profit, simply divide profit by the quantity produced.
all
What would make for allocatively efficient production in a perfectly competitive market?
long run equilibrium
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in __________.
economies of scale
When car makers began to cut the costs of producing cars by designing the chassis, engine, and transmissions so that different models could be produced on the same assembly line, production costs fell $240 per car. Based on this information, this scenario could potentially illustrate _________________.
when the LRATC remains constant as quantity increases
When do constant returns to scale occur?
when LRAC increases as output increases
When will a firm experience diseconomies of scale?
-a part-time worker with no contract -office supplies used on a daily basis
Which of the following is an example of a variable input?
Exiting the market occurs in response to a sustained pattern of losses.
Which of the following is true about firms exiting a perfectly competitive market?
average profit
______, also known as profit margin, is the profit divided by quantity produced, or average revenue minus average cost.
the law of diminishing marginal product
__________ explains why adding more workers will eventually decrease or have no effect on output.
poor management high competition low revenue
reasons a business would shut down