MicroEconomics - Pearson - Chapter 11 Concept Check and Vocabulary

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Refer to the table to the right. What is the marginal cost of producing the 200th​ pizza?

$3.25

Fixed Costs

Costs that remain constant as output changes.

Explicit Cost

A cost that involves spending money

Explicit costs are sometimes called:

Accounting Costs

Economic costs include both:

Accounting Costs and Implicit Costs

When a positive technological change​ occurs,

Answer: Either​ (a) or​ (b) A. more output can be produced from the same inputs. B. the same output can be produced with fewer inputs.

The Average Product of Labor is the

Average of the Marginal products of Labor

Marginal product of Labor

The additional output a firm produces as a result of hiring one more worker

Marginal Cost

The change in a firm's total cost from producing one more unit of a good or service

Short Run

The period of time during which at least one of a firm's is fixed.

Long Run

The period of time in which a firm can vary all its inputs, adopt new technology and increase or decrease the size of its physical plant

Law of Diminishing Returns

The principle that, at some point, adding more of a variable input such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.

Technology

The processes a firm uses to turn inputs into outputs of goods and services

Production Function

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs

When the marginal product of labor is increasing -

The total output increases at an increasing rate

All of the following cost measures reach their minimum points when they are equal to the value of marginal​ cost, except one. Which cost measure is the​ exception?

average fixed cost

What cost measure is equal to AFC plus AVC​?

average total cost

Refer to the to graph on the right. When marginal cost is less than average total​ cost, average total cost must be

decreasing.

Which of the following are sometimes called accounting​ costs?

explicit costs

The law of diminishing returns applies

in the short run

Refer to the to graph on the right. From point A up until point ​B,

output increases at a decreasing rate.

Which costs are affected by the level of output​ produced?

variable costs

Refer to the table below. When do diminishing returns in the production of pizzas​ start?

when the third worker is hired

Technological Change

A change in the ability of a firm to produce a given level of output with a given quantity of inputs

Implicit Cost

A non-monetary opportunity cost

Variable Costs

Costs that change as output changes

The​ 7-Eleven chain of convenience stores in Japan reorganized its system for supplying its stores with food. This led to a sharp reduction in the number of trucks the company had to​ use, while increasing the amount of fresh food on store shelves. Someone discussing​ 7-Eleven's new system argues ​"This is not an example of technological change because it did not require the use of new machinery or​ equipment." Briefly explain whether you agree with this argument.

Both a and b. A. The argument is incorrect. Technology includes the speed of existing machinery and equipment. B. The argument is incorrect. Technology includes the efficiency of existing machinery and equipment.

Which of the graphs (to the right) represents a typical average total cost​ curve?

Graph B

Total Cost

The cost of all the inputs a firm uses in production. Fixed Costs plus Variable Costs equals Total Costs

Opportunity Costs

The highest valued alternative that must be given up to engage in an activity.

Refer to the to graph on the right. For a certain output range​ (or quantity of pizzas produced per​ day), marginal cost is greater than average cost. What is this output​ range?

The output range greater than about 525 pizzas per day

When the marginal product of labor is decreasing but still positive -

The total output increases, but at a decreasing rate

Average Product of Labor

The total output produced by a firm divided by the quantity of workers.

Average Total Cost

Total cost divided by the quantity of output produced

When the marginal product of labor is greater than the average product of​ labor, then the average product of labor must be

increasing.

The GPA you earn in a particular semester is your​ ________ GPA, and your cumulative GPA for all completed semesters is your​ ________ GPA.

marginal; average

Refer to the to graph on the right. From the origin up until point ​A

output increases at an increasing rate.

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the

production function.

As output​ increases, the vertical distance between average total cost and average variable cost curves gets​ _______ and equals​ _______.

smaller average fixed cost

Refer to the table to the right. Which of the following costs are implicit​ costs?

the forgone salary and interest

When the marginal product of labor is rising -

the marginal cost of output is falling

When the marginal product of labor is falling -

the marginal cost of output is rising


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