Homework 3

______________ include all of the costs of production that increase with the quantity produced.

Variable costs

In economics, a firm that faces no competitors is referred to as _________________.

a monopoly

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change,

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.

upward sloping; more costly to produce

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?

variable costs

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

2.43

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B

In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.

acquire energy efficient production technologies

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost

The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.

average variable cost; fixed costs

21

c

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

either total cost or variable cost

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

The term _____________ is used to describe the additional cost of producing one more unit.

marginal cost

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? A. physical space for the gallery B. costs of purchasing art work to sell in the gallery C. wages paid to three part-time employees D. accountant's fees for preparing tax returns

physical space for the gallery

Why would labor be treated as a variable cost?

producing larger quantities of a good or service generally requires more workers

Fixed costs are important because, at least in the ___________, the firm _______________.

short run; can not alter them

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

total costs

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

total revenue

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns