Microeconomics Ch. 7

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

Total costs

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

marginal cost

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; cannot alter them

Which of the following should typically be ignored because spending has already been made and cannot be changed?

sunk costs

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

total revenue

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

upward-sloping; more costly to produce

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

whether the firm is earning profit if fixed costs are left out of the calculation.

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

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

constant returns to scale

The ______________ of all firms can be broken down into some common underlying patterns.

cost structure

Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs?

costs incurred in the act of producing

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?

costs of research and development

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

decreasing returns to scale

In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.

diseconomies of 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,

Economies of scale may arise from all but one of the following. Which one is it?

government economic subsidies protect firms from competition to avoid losses

In order to determine the average variable cost, the firm's variable costs are divided by _______

he quantity of output

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

increasing returns to scale

The economies-of-scale curve is a long-run average cost curve, because

it allows all factors of production to change.

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

Diminishing marginal returns

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

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

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

$1.00

I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage an spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was

$2.00

In the US economy, nearly half of all the workers employed by private firms work at

18,000 large firms that employ more than 500 workers.

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

35%

________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

Agglomeration factors

_________ tells a firm whether it can earn profits given the price in the market.

Average cost

___________________ arises where many firms are competing in a market to sell similar but differentiated products.

Monopolistic competition

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

Total revenue

__________ 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

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

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

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will

do so regardless of what type of competition exists in a market.

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ___________

economies of agglomeration; corresponding diseconomies

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

economies of scale

When __________________ exist, doubling of all inputs will result in more than doubling output, which means _____________________

economies of scale; a larger factory can produce at a lower average cost than a smaller company.

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

either total cost or variable cost