MircoEcon Chapter 13 T/F

Accountants often ignore implicit costs

True

the use of specialization to achieve economies of scale is one reason modern societies are a prosperous as they are

True

variable cost usually change as the firm alters the quantity of output produced

True

in some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories

True - short run = steeper - long run = flatter

assume hack received all A's in his last semester. If jack gets all C's in his classes this semester, his GPA may or may not fall

True - think about all the other semesters he can have before these 2

Economists normally assume that people start their own businesses to help society maximize its income

False - firms profit

in the long run, a factory is usually considered a fixed input

False - no fixed cost in the long run

If the marginal cost curve is rising, so is the average total cost curve

False - MC rising - ATC can rise or fall

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 curve

False - big impact (not little)

diseconomies of scale often arise because higher production levels allow specialization among workers

False - diseconomy = coordination - economy = specialization

when economists speak of a firm's costs, they are usually excluding the opportunity costs

False - include both implicit and explicit costs

the average total cost curve is unaffected by diminishing marginal product

False - it is affected

average total cost reveals how much total cost will change as the firm alters its level of production

False - not ATC but the MC

Diminishing marginal product exists when the total cost curve becomes flatter as outputs increases

False - not flatter but steeper

fixed costs are those costs that remain fixed no matter how long the time horizon is

False - only fixed cost in the short run

The shape of the total cost curve is unrelated to the shape of the production function

False - they are related - production function = flatter - total cost = steeper

variable costs equal fixed costs when nothing is produced

False Q = 0 VC = 0 FC = <0

Accountants keep track of the money that flows into and out of firms

True

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve

True

Implicit costs are costs that do not require an outlay of money by the firm

True

a second or third worker may have a higher marginal product than the first worker in certain circumstances

True

diminishing marginal product exists when the production function becomes flatter as input increase

True

fixed cost are incurred even when a firm does not produce anything

True

the cost of producing an additional unit of a good is not the same as the average cost of the good

True

the marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve

True

average variable cost is equal to total variable cost divided by quantity of output

True TVC/Q

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

True - "firm" - marginal product

the shape of the marginal cost curve tells a producer something about the marginal product of her workers

True - MCC & DMP relate

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

True - mim ATC

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 - numbers of locations

average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost

True -TC divided by Q

the average total cost curve reflects the shape of both the average fixed cost and average variable cost curves

True ATC = AFC+AVC