ch 11

The standard production function exhibits

first increasing, then decreasing marginal productivity

Total cost is equal to _____.

fixed cost plus variable cost

The main difference between variable and fixed costs is that

fixed costs remain constant with the level of output, while variable costs change.

If average variable cost is rising, we can infer that marginal cost is

greater than average variable cost.

Implicit costs

include the opportunity costs of the factors of production provided by the owners of the business.

Economic profit

includes implicit revenue and cost, and accounting profit includes explicit revenue and cost. includes explicit revenue and cost, and accounting profit includes explicit revenue and cost.

As output decreases, average fixed cost _____.

increases

When marginal productivity falls, marginal cost _____.

rises

Refer to the graph. In region C, marginal cost is

rising and average variable cost is rising.

A firm is constrained in regard to what production decisions it can make in the _____.

short run

Using economists' framework, explicit payments to the factors of production plus the opportunity cost of the factors provided by the owners of the firm is _____.

total cost

Which of the following is always upward sloping?

total cost curve

Using economists' framework, the amount a firm receives for selling its product or service plus any increase in the value of the assets owned by the firm is known as _____.

total revenue

The total cost curve is _____.

upward sloping

Average variable cost is the

variable cost divided by the quantity produced.

Costs that change as output changes are called _____.

variable costs

A firm sells 5 hats for $20 apiece, and incurs a cost of $10 apiece. The firm makes a profit of _____.

$50

The production function shown exhibits increasing marginal productivity in area _____.

A

Refer to the graph above. In which region(s) will the firm most likely choose not to produce?

A C A and C

True or false: The primary distinction between a long run and a short-run decision is the degree of flexibility in decision making.

True

Using economists' framework, economic profit is best defined as

explicit and implicit revenue less explicit and implicit cost.

Total economic cost is

explicit payments to the factors of production plus the opportunity cost of the factors provided by the owners of the firm.

A firm is an economic institution that transforms

factors of production into goods and services.

If marginal cost is rising, we can infer that marginal productivity is _____.

falling

When costs per unit are rising, we can infer that the productivity is _____.

falling

Variable cost divided by quantity produced is called _____.

average variable cost

A firm has a fixed cost of $1,200 and variable costs of $120 per unit. What is the average total cost of producing 5 units of output?

$360

Josie, who was previously employed as a policewoman, owns a firm that produces burglary kits. She used to earn $1000 per month when she was a policewoman and she could return to that job if she wanted to do so. Now, she sells 500 kits in a month for $10 each. The cost of production is $2000. In a month, she makes an economic profit of _____.

$2,000

George, who was previously unemployed, owns a firm that produces books. He sells 20 books on average per week for $50 each, and the cost of their production is $800. He makes a weekly accounting profit of _____.

$200

A firm has fixed costs of $400 and average variable costs of $5 per unit. What is the average total cost of producing 20 units of output?

$25

A firm sells 10 shoes for $400, and incurs a total cost of $100. The firm makes an average profit of _____.

$30

The owner of a shoe firm could instead work as an accountant to earn $300 per week. The implicit cost of her contribution to production is _____.

$300

A firm has a fixed cost of $100, and variable costs of $500. What is the total cost?

$600

The graph shown illustrates cost curves for a given production function. The marginal cost curve is represented by curve _____.

A

Which of the following statements is true about the short and long runs?

All inputs are variable in the long run. Some inputs are fixed in the short run.

Refer to the graph above. This firm is most likely to produce in region(s) _____.

B

The graph shown illustrates cost curves for a given production function. Which one represents an average total cost curve?

B

The production function shown exhibits diminishing marginal productivity in area ____

B

The production function shown exhibits diminishing marginal productivity in area ____.

B

The graph shown illustrates cost curves for a given production function. Which one represents an average variable cost curve?

C

True or false: According to the law of diminishing marginal productivity, marginal product will decline more slowly as output increases.

False

True or false: The average total cost curve has the same general U-shape as the average variable cost curve because the average total cost curve is the vertical sum of the average variable cost curve and the marginal cost curve.

False

True or false: Ultimately, all supply comes from firms.

False

Which of the following cannot exist in the long run?

Fixed costs

The firm has the greatest production flexibility in which time frame?

Long run

Which of the following tells the maximum output that can be derived from a given number of inputs?

Production function

Which of the following data is provided in a production table?

The level of output given various combinations of inputs.

Fixed costs do not exist in which time frame?

The long run

True or false: Area B is the only range of output in which average total costs are falling and average variable costs are rising.

True

True or false: The difference between economic profit and accounting profit is that economic profit includes implicit revenue and cost, while accounting profit does not.

True

The graph shown illustrates cost curves for a given production function. Curve A represents _____.

a marginal cost curve

Marginal product of workers is the

additional output that will be forthcoming from an additional worker, other inputs constant

The graph shown illustrates cost curves for a given production function. Curve B represents _____.

an average total cost curve

The graph shown illustrates various cost curves related to a production function. Curve D is _____.

an averaged fixed cost curve

The law of diminishing marginal productivity states that

as more and more of a variable input is added to an existing fixed input, eventually the additional output one gets from that additional input is going to fall.

When the productivity curves are falling, the corresponding cost curves are rising because

as productivity falls, costs per unit increase and vice-versa.

Fixed cost divided by quantity produced is called _____.

average fixed cost

Output per worker is called _____.

average product

Total cost divided by the quantity produced is called _____.

average total cost

The law of diminishing marginal productivity implies that eventually

both marginal and average cost curves will be upward sloping.

A firm enters into trade with:

businesses. government. individuals.

In a long-run decision, a firm

can choose among all possible production techniques.

Variable cost are costs that

change as output changes.

Variable costs _____, while fixed costs _____.

change; remain constant

As output increases, average fixed cost _____.

decreases

Average fixed cost is fixed cost

divided by quantity produced

Average total cost is the total cost

divided by the quantity produced.

Explicit and implicit revenue less explicit and implicit cost is equal to _____.

economic profit

The standard production function

initially exhibits increasing marginal productivity. eventually exhibits diminishing marginal productivity.

A production function is the relationship between _____.

inputs and outputs

A firm can choose among all possible production techniques in the _____.

long run

The additional output that will be forthcoming from an additional worker, other inputs constant is called _____.

marginal product

Average product is the

output per worker

Using economists' framework total revenue includes

the amount a firm receives for selling its product or service plus any increase in the value of the assets owned by the firm

A production table is a table showing

the output resulting from various combinations of factors of production or inputs