Economics Exam 3

T/F: Average total cost reveals how much total cost will change as the firm alters its level of production

False

T/F: Diseconomies of scale often arise because higher production levels allow specialization among workers

False

T/F: Economists normally assume that people start their own businesses to help society maximize its income

False

T/F: If the marginal cost curve is rising, so is the average total cost curve

False

T/F: The average total cost curve is unaffected by diminishing marginal product

False

T/F: The fact that many decisions are fixed in the short run but variable in the long run has little impact on the firm's cost curves

False

T/F: The shape of the total cost curve is unrelated to the shape of the production function

False

T/F: Variable costs equal fixed costs when nothing is produced

False

T/F: When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale

False

T/F: When economists speak of a firm's costs, they are usually excluding the opportunity costs

False

An example of an implicit cost of production would be

the income an entrepreneur could have earned working for someone else

one of the most important properties of cost curves is that

the marginal cost curve eventually rises with the quantity of output

T/F: Diminishing marginal product exists when the total cost curve becomes flatter as output increases

False

T/F: Fixed costs are those costs that remain fixed no matter how long the time horizon is

False

T/F: Diminishing marginal product exists when the production function becomes flatter as inputs increase

True

T/F: When trying to understand the decision making process of different firms, economists assume that people think at the margin

True

T/F: Accountants keep track of the money that flows into and out of firms

True

T/F: Accountants often ignore implicit costs

True

T/F: As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production

True

T/F: Average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost

True

T/F: Average variable cost is equal to total variable cost divided by quantity of output

True

T/F: Because of the greater flexibility that firms have in the ling run, all short-run curves lie on or above the long-run curve

True

T/F: Fixed costs are incurred even when a firm does not produce anything

True

T/F: The cost of producing an additional unit of a good is not the same as the average cost of the good

True

T/F: The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve

True

T/F: The shape of the marginal cost curve tells a producer something about the marginal product of her workers

True

T/F: Variable costs usually change as the firm alters the quantity of output produced

True

Specialization among workers occurs when

each worker is allowed to perfect one particular task

Some costs do not vary with the quantity of output produced. Those costs are called

fixed costs

total cost can be divided into two types. those two types are

fixed costs and variable costs

the long-run average total cost curve is always

flatter than the short-run average total cost curve, but not necessarily horizontal

the length of the short run

is different for different types of firms

when a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs

Economies of scale occur when

long-run average total costs fall as output increases

Economists normally assume that goal of a firm is to

maximize profit

Variable cost divided by the quantity produced is

none of the above are correct

The marginal product of an input in the production process is the increase in

quantity of output obtained from an additional unit of that input

a total-cost curve shows the relationship between the

quantity of output produced and the total cost of production

If a firm produces nothing, which of the following costs will be zero?

variable cost

Marginal cost tells us the

amount by which total cost rises when output is increased by one unity

Which of the following statements about costs is correct?

as the quantity of output increases, marginal cost eventually rises

the firm's efficient scale is the quantity of output that maximizes

average total cost

average total cost tells us the

cost of a typical unit of output, if total cost is divided evenly over all the units produced

Economic profit is equal to

total revenue-(explicit costs+implicit costs) total revenue-opportunity costs