ECON 2000 ch 6

The average fixed cost (AFC) curve:

declines as long as output increases

The marginal cost curve intersects the minimum of the curve representing:

ATC

Implicit costs:

Are the value of resources used to produce a good but for which no monetary payment is made.

According to the World View article titled "United States Gains Cost Advantage," during the last decade, unit labor costs in the United States declined:

Because productivity advances were greater than wage increases.

When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles:

Economies of scale must exist.

The average total cost (ATC) curve will become positively sloped when the:

Decline in AFC becomes smaller than the increase in AVC.

Economies of scale:

Explain why average total costs decline as output increases in the long run

In the long run, which of the following is likely to be a variable cost?

Factory rental but not wage costs

A U-shaped average total cost curve implies:

First, marginal cost below average total cost, and then marginal cost above average total cost.

Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?

In the long run, firms can increase the availability of space and equipment to keep up with the increase in variable inputs.

In the short run, which of the following is most likely a variable cost?

Labor and raw materials

The shape of the marginal cost curve reflects the:

Law of diminishing returns

Intel's chief executive says the company might expand the technology it is using in its planned $2.5 billion chip-manufacturing factory in China if the U.S. government allows it, underscoring the technology giant's ambitions in the world's fourth-biggest economy. The Intel executive is making

Long run decision, therefore an investment decision.

The long-run average total cost curve is constructed from the:

Lowest average total cost for producing each level of output.

When the production function shifts upward:

MC shifts downward

The average total cost (ATC) curve will be negatively sloped so long as:

Marginal costs are less than average total costs

Higher education levels and better management:

Shift the long-run ATC curve downward.

Which of the following is always downward sloping?

The average total cost curve when it is above the marginal cost curve

The average variable cost curve slopes upward with a higher rate of output in the short run because of

The effect of diminishing returns

If the marginal cost curve is rising, then which of the following must be true?

Total costs must be rising

The In the News article titled, United States Gains Cost Advantage, says productivity advances have contributed to U.S. competitiveness in world markets. When improvements in productivity reduce costs the production function shifts:

Upward and cost curves shift downward.

Assuming labor is a variable input, an increase in labor productivity will result in:

a downward shift in the MC curve

Which of the following is least likely to increase productivity?

a higher wage rate

Diminishing returns occur because of:

a rising ratio of variable input to fixed input

When the average total cost curve is rising, then the marginal cost curve will be:

above the average total cost curve

Which of the following statements about the relationship between economic costs and accounting costs is true?

accounting costs are always less than or equal to economic costs

Labor productivity will increase in response to:

an increase in the amount of capital per worker

Explicit costs:

are the sum of actual monetary payments made for resources used to produce a good

Technical efficiency is achieved wen a firm produces:

at the amount indicated by the production function

Technological changes that increase productivity shift the:

average total cost curve downward

In the short run, the law of diminishing returns:

can be observes in every production process

Marginal physical product is the:

change in total output associated with one additional unity of the variable input

Assume a given amount of output can be produced by several small plants or one large plant with identical minimum per-unit costs. This long-run situation reflects the existence of:

constant returns to scale

Accounting costs and economic costs differ because:

economic costs include implicit costs and accounting cost do not

One In the News article titled, Funeral Giant Moves In on Small Rivals, reports profit for a Houston- based funeral giant is 31 cents on every dollar versus a profit of 12 cents for the funeral industry in general. Such profits are most likely the result of:

economies of sccale

If a firm could hire all the workers it wanted at a zero wage (i.e., the workers are volunteers), the firm should hire:

enough workers to produce where the MPP equals zero

In the short-run, when a firm produces zero output, total cost equals:

fixed costs

Which of the following costs do NOT change when output changes in the short run?

fixed costs

Which of the following is a factor of production for the Little Biscuit Bread Company?

flour

Greater labor productivity means:

higher output per worker

Economic cost:

includes both implicit and explicit costs

Which of the following would cause a firm's production function to shift upward?

increased training for the firm's workers

Marginal cost

is the change in total cost from producing one additional unit of output.

Which of the following are factors of production?

land, labor, capital, and entrepreneurship

The period in which there are no fixed costs is the:

long run

If marginal physical product is falling, then the:

marginal cost of each unit of output is rising

The change in total output associated with one additional unit of input is the:

marginal physical product

Ceteris paribus, the law of diminishing returns states that beyond some point, the:

marginal physical product of a factor of production diminishes as more of that factor is used.

Which of the following is the slope of the production function with respect to an input?

marginal physical product of the input

The most desirable rate of output for a firm is the output that:

maximizes total profit

A production function shows the:

maximum output that can be produced with varying combinations of factor inputs

The most desired goods and services that are given up in order to get more of another good is the:

opportunity cost

In the short run, when a firm produces zero output, variable cost equals:

zero

Which of the following is most likely a fixed cost?

property taxes

Marginal cost:

rises as a direct result of diminishing returns

The period in which at least one input is fixed in quantity is the:

short run

Which of the following contributes to the typical U-shape of the average total cost (ATC) curve?

the eventual dominance of the rising MC curve

The short-run production function shows how output changes when:

the quantity of labor changes

In economics, the long run is considered to be:

the time period when all casts are variable

The sum of fixed cost and variable cost at any rate of output is:

total cost

Economies of scale are reductions in average:

total cost that result from using operations of larger size

An increase in production in the short run definitely results in an increase in:

total costs

When a firm produces at a technically efficient output level, it is:

using the fewest resources to produce a good orservice

At any given rate of output, the difference between total cost and fixed cost is:

variable cost

Changes in marginal costs result from changes in:

variable costs

Changes in short-run total costs result from changes in:

variable costs