Econ Ch 13

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve

becomes steeper as the quantity of output increases.

d. no impact on either the price of the good or the number of firms in the market.

c. an increase in the number of firms in the market but no increase in the price of the good

d. price equals average variable cost.

c. marginal cost equals marginal revenue

e. upward-sloping portion of the AVC curve

c. portion of the marginal-cost curve that lies above the AVC curve

d. perfectly inelastic

c. upward sloping

d. variable costs of staying open are less than the total revenue due to staying open

c. variable costs of staying open are greater than the total revenue due to staying open

e. All of the above are characteristics of a competitive market

d. Firms generate small but positibe economic profits in the long run.

d. average total cost.

d. average total cost

e. all of the above

e. all of the above

In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience

economies of scale.

Accounting profit is equal to total revenue minus

explicit costs.

Economic profit is equal to total revenue minus

the sum of implicit and explicit costs.

Which of the following is a variable cost in the short run?

wages paid to factory labor.

Which of the following statements is true?

All costs are variable in the long run.

Fixed costs plus variable costs equal total costs.

True

If a firm continues to employ more workers within the same size factory, it will eventually experience diminishing marginal product.

True

If there are implicit costs of production, accounting profits will exceed economic profits.

True

If total revenue is $100, explicit costs are $50, and implicit costs are $30, then accounting profit equals $50.

True

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will be U-shaped.

True

The average-total-cost curve in the long run is flatter than the average-total-cost curve in the short run.

True

Total revenue equals the quantity of output the firm produces times the price at which it sells its output.

True

When marginal costs are below average total costs, average total costs must be falling.

True

d. equal to the quantity of the good sold.

a. equal to the price of the good sold.

e. All of the above represent competitive markets.

a. gold bullion

d. temporarily shut down

a. increased production

d. is always perfectly elastic

a. is always more elastic than the short-run market supply curve

d. perfectly inelastic

a. perfectly elastic

If there are implicit costs of production,

accounting profit will exceed economic profit.

The efficient scale of production is the quantity of output that minimizes

average total cost.

When marginal costs are below average total costs,

average total costs are falling.

d. cannot be determined because the price of the good may rise or fall

b. doubles

e. upward-sloping portion of the AVC curve

b. portion of the marginal-cost curve that lies above the ATC curve

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

be U-shaped.

If a production function exhibits diminishing marginal product, its slope

becomes flatter as the quantity of the input increases.

Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory for $40,000 per year. The economic profit at Madelyn's pottery factory is

$30,000.

Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory for $40,000 per year. The accounting profit at Madelyn's pottery factory is

$75,000.

The average-total-cost curve crosses the marginal-cost curve at the minimum of the marginal-cost curve.

False

The efficient scale for a firm is the quantity of output that minimizes marginal cost.

False

Wages and salaries paid to workers are an example of implicit costs of production.

False

When a production function gets flatter, the marginal product is increasing.

False

Average total costs are total costs divided by marginal costs.

False

If the production function for a firm exhibits diminishing marginal product, the corresponding total-cost curve for the firm will become flatter as the quantity of output expands.

False

In the long run, as a firm expands its production facilities, it generally first experiences diseconomies of scale, then constant returns to scale, and finally economies of scale.

False