ch 9 production 01

Which of the following is true of economic costs?

Economic costs are defined as the sum of explicit and implicit costs.

Average product is the:

amount of output produced per unit of a resource employed.

The average fixed cost curve:

decreases for all levels of output.

Economic costs can be defined as the sum of _____ and _____ costs.

implicit; explicit

When deciding whether to keep production at the current level of output or produce more, a firm will need to compare the:

marginal cost and marginal benefit.

The marginal cost curve shows the relationship between:

marginal cost and output.

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's) $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The implicit costs include:

the owner's forgone salary.

Costs that change with the amount of output produced are _____ costs.

variable

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The implicit costs are

$30000

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The explicit costs are

$60000

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The total economic cost is

$90,000

Diseconomies of scale is a condition in which the long-run average total cost of production ______ as production increases

increases

One reason for diseconomies of scale is:

increasing opportunity costs

One potential reason diseconomies of scale could exist is that:

inputs are not as productive as the inputs used before.

If a company decides to produce zero units of output,:

it still has to pay fixed costs of production.

Which of the following is a way in which firms can avoid paying fixed costs in the short run?

Firms cannot avoid fixed costs in the short run.

Total revenue equals

Price x Quantity

Economies of scale is a condition in which the ________-run average total cost of production decreases as production increases.

long

Marginal product is the:

additional output produced as a result of utilizing one more unit of a variable resource.

Total product divided by the number of units of a resource employed gives the ______ product of the resource

average

The fixed cost per unit is equal to:

average fixed cost

The vertical distance between the average variable cost and average total cost curves gets smaller as more output is produced because this distance is equal to the:

average fixed cost which declines as output increases.

Total cost per unit is equal to:

average total cost

Variable cost per unit of output produced is:

average variable cost

Total variable cost divided by the amount of output produced is equal to:

average variable cost.

The variable cost curve, at each output level, falls:

below the total cost curve by the amount of the fixed cost curve.

______ returns to scale occurs when long-run average total cost does not change as output increases.

constant

A condition in which the long-run average total cost of production remains constant as production increases is called:

constant returns to scale

For each additional worker hired after diminishing marginal returns begins, the marginal product curve will be:

decreasing

The marginal cost curve is:

decreasing for low levels of output, then begins increasing.

Business operating decisions should be based on _____ profit.

economic

Positive _____ profits encourage more firms to enter the market to produce goods and services.

economic

Total revenue minus the explicit and implicit costs of production is

economic profit

A condition in which the long-run average total cost of production decreases as production increases is called:

economies of scale

total cost

equals total fixed cost plus total variable cost.

Monetary payments made by individuals, firms ,and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____ costs.

explicit

A firm incurs ______ costs when it pays for a factor of production at the same time that it uses it, whereas _______ costs are the costs associated with a firm's use of resources that it owns.

explicit; implicit

The additional output produced as a result of utilizing one more unit of a variable resource is called:

marginal product

A profit-maximizing firm should produce a level of output where:

marginal revenue equals marginal cost.

Zero accounting profit means that the value of economic profit is

negative

The ______ costs of using owned resources are implicit costs.

opportunity

Costs that do not change with the amount of _____ produced are fixed costs.

output

A fixed cost curve is

perfectly horizontal, while total variable cost curve is upward sloping.

When the marginal ______ increases, the marginal cost of production declines.

product

Economic profit consists of _____; accounting profit consists of _____.

revenue minus implicit and explicit costs; revenue minus explicit costs

A period of time in which at least one input of production is fixed is known as the

short run

Average product is the:

the amount of output produced per unit of a resource employed