ECON 2003 -PRODUCTION
Total revenue minus the total _____ costs of production is accounting profit. A: explicit B: interior C: normal D: implicit
A: explicit
(Average fixed cost + average variable cost) = A: Average total cost B: Total fixed cost C: Total variable cost D: Average variable cost
A: Average total cost
The marginal cost is the: A: extra or additional cost associated with the production of an additional unit of output. B: cost associated with the production of an additional unit of input. C: cost associated with the production of an additional unit of output. D: extra or additional cost associated with the production of an additional unit of input.
A: extra or additional cost associated with the production of an additional unit of output.
Constant returns to scale occur when: A: long-run average total cost does not change as output increases. B: long-run average total cost does increases as output increases. C: long-run average total cost does decreases as output increases.
A: long-run average total cost does not change as output increases.
Total revenue equals: A: price times quantity. B: output times quantity. C: price times cost. D: cost times output.
A: price times quantity.
A condition in which the long-run average total cost of production remains constant as production increases is called: A: economies of scale. B: minimum-efficiency scale. C: constant returns to scale. D: diseconomies of scale.
C: constant returns to scale.
Zero accounting profit means that the value of _____ profit is negative. A: direct B: implicit C: economic D: explicit
C: economic
Costs that do not change with the amount of output produced are _____ costs. A: .marginal B: variable C: fixed D: total
C: fixed
What are the appropriate labels for Curves N and M in the nearby graph? A: Curve N is total variable cost and Curve M is total fixed cost. B: Curve N is total cost and Curve M is total fixed cost. C: Curve N is total variable cost and Curve M is total cost. D: Curve N is total cost and Curve M is total variable cost.
D: Curve N is total cost and Curve M is total variable cost. Reason: The total cost curve lies above the total variable cost curve by the amount of the fixed cost. Since Curve N lies above Curve M by the same amount for all levels of output, it is the total cost, while the upward sloping Curve M is the total variable cost. Curve L is fixed at the same cost for all output, it is the fixed cost curve.
The shape of the long-run average total cost curve can differ for different types of firms. (True or False) True False
TRUE
Economic costs can be defined as the sum of _____ and _____ costs. A: explicit; average B: implicit; explicit C: total; marginal D: implicit; average
B: implicit; explicit
_______ is an important factor in determining the true cost of an economic activity such as the production of goods and services. A: Implicit cost B: Total revenue C: Supply cost D: Demand cost
A: Implicit 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: A: average fixed cost which declines as output increases. B: average marginal cost which declines as output increases. C: total fixed cost which declines as output increases. D: marginal cost which declines as output increases.
A: average fixed cost which declines as output increases.
The fixed cost per unit is equal to: A: average fixed cost. B: average total cost. C: marginal cost. D: average variable cost.
A: average fixed cost.
Total fixed cost divided by the amount of output produced is equal to: A: average fixed cost. B: average total cost. C: marginal cost. D: average variable cost.
A: average fixed cost.
The costs associated with the use of resources are called: A: economic costs. B: accounting costs. C: implicit costs. D: explicit costs.
A: economic costs.
Marginal values drive _______________ values (remember enter only one word)
Blank 1: Average
The additional output produced as a result of utilizing one more unit of a variable resource is called: A: marginal revenue. B: total cost. C: marginal product. D: total product.
C: marginal product.
A firm is planning to increase output in the long run from 100 units to 200 units. The long run average total cost falls from $25 to $20. What can be said about this level of output? A: The firm is experiencing diseconomies of scale. B: The firm is experiencing constant returns to scale. C: The firm is experiencing scarce returns to scale. D: The firm is experiencing economies of scale.
D: The firm is experiencing economies of scale.
Which of the following is true of economic costs? A: Economic costs are defined as the sum of explicit and implicit costs. B: Economic costs are defined as the sum of all implicit costs. C: Economic costs are defined as the sum of all explicit costs. D: Economic costs are defined as the difference between explicit costs and implicit costs.
A: Economic costs are defined as the sum of explicit and implicit costs.
Total revenue minus the explicit cost of production is _____ profit. A: accounting B: total C: consumer D: economic
A: accounting
Average product is the: A: amount of output produced per unit of a resource employed. B: total output produced as a result of utilizing one more unit of a fixed resource. C: amount of a resource employed per unit of output. D: additional output produced as a result of utilizing one more unit of a fixed resource.
A: amount of output produced per unit of a resource employed.
Average total cost equals: A: average fixed cost plus average variable cost. B: total fixed cost plus total variable cost. C: total fixed cost plus average variable cost. D: average fixed cost divided by average variable cost
A: average fixed cost plus average variable cost.
The average fixed cost curve: A: decreases for all levels of output. B: increases for all levels of output. C: decreases for low levels of output, then begins to increase as output increases. D: increases for low levels of output, then begins to decrease as output increases.
A: decreases for all levels of output. Reason: Since fixed costs are the same no matter the level of output, as output increases average fixed costs will always fall, approaching $0 for high levels of output.
The short run is a period of time in which: A: all inputs of production are variable. B: at least one input of production is fixed. C: no inputs of production are fixed. D: no inputs of production are variable.
B: at least one input of production is fixed.
Variable cost per unit of output produced is: A: average fixed cost. B: average variable cost. C: marginal cost. D: average total cost.
B: average variable cost.
Negative _________ profits encourage firms to exit the market.
Blank 1: economic
When the ____________ cost falls below the _____________ cost, the average cost should be decreasing.
Blank 1: marginal Blank 2: average
The fixed cost curve is: A: perfectly vertical, while the total variable cost curve is downward sloping. B: upward sloping, while total variable cost curve is perfectly horizontal. C: perfectly horizontal, while total variable cost curve is upward sloping. C: downward sloping, while the total variable cost curve is perfectly vertical.
C: perfectly horizontal, while total variable cost curve is upward sloping. Reason: The fixed cost curve is perfectly horizontal at the level of fixed costs over all levels of output. The total variable cost curve is upward sloping over all levels of output.
The average total cost curve is: A: less than the average variable cost curve for low levels of output, but greater for higher output levels. B: greater than the average variable cost curve for low levels of output, but less for higher output levels. C: less than the average variable cost curve for all levels of output. D: greater than the average variable cost curve for all levels of output.
D: greater than the average variable cost curve for all levels of output.
One reason for diseconomies of scale is: A: increasing marginal product. B: decreasing short-run average costs. C: decreasing total product. D: increasing opportunity costs.
D: increasing opportunity costs.
In addition to total cost, it is useful to calculate _________ cost because it is more useful for managing. (Enter only one word in the blank.)
Blank 1: average
Total product is: A: the total amount of output produced with a given amount of resources. B: the total cost of output produced with a given amount of resources. C: the change in total product due to a change in a variable input to production. D: the total amount of revenue generated from selling goods services or resources.
A: the total amount of output produced with a given amount of resources.
Total cost equals: A: total fixed cost plus total variable cost. B: marginal fixed cost plus total variable cost. C: total fixed cost plus average variable cost. D: average fixed cost plus total variable cost.
A: total fixed cost plus total variable cost.
A firm has the following information available on the short-run average total cost for three different plant sizes. PLANT SIZE - OUTPUT - SHORT RUN AVERAGE TOTAL COST ---------------------------------------------------------------------- SMALL 50 UNITS $400 MEDIUM 50 UNITS $200 LARGE 50 UNITS $200 Which of the following points will fall on the firm's long-run average total cost curve? A: 50 units and $220 B: 50 units and $200 C: All three plant sizes and their costs will fall on the curve. D: 50 units and $400
B: 50 units and $200 Reason: The LRATC curve is calculated by using the plant size with the minimum short-run average total cost for each quantity. When the level of output is 50 units the large plant size has the lowest average total cost. If 50 units is found to be the optimal long-run output, the firm will operate out of a large plant in the long-run.
One potential reason diseconomies of scale could exist is that a firm: A: can buy inputs less expensively. B: cannot perfectly replicate its production when it expands. C: cannot afford to expand. D: has exhausted constant returns to scale.
B: cannot perfectly replicate its production when it expands.
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are _________________ (variable/fixed) is the long-run average cost curve.
Blank 1: variable
Total cost divided by the amount of output produced is equal to: A: average fixed cost. B: marginal cost. C: average variable cost. D: average total cost.
D: average total cost.
The _________________ costs of using owned resources are implicit costs.
Blank 1: opportunity
The total amount of output produced with a given amount of resources is known as the total __________
Blank 1: product
Total ________equals price times quantity. (Use one word for the blank.)
Blank 1: revenue
A period of time in which all inputs of production are variable is the ____________ run. (Use one word for the blank.)
Blank 1: long
The additional output produced as a result of utilizing one more unit of a variable resource is the ____________ product. (Answer in one word.)
Blank 1: marginal
Total revenue minus the total _____ costs of production is accounting profit. A: normal B: explicit C: interior D: implicit
B: explicit
The shape of the long-run average total cost curve can differ for different types of firms depending on: A: the time of year that the comparison is made. B: how much production it takes to reach the minimum long-run average total cost. C: how much production it takes to reach the minimum short-run average total cost. D: the behavior of the market demand.
B: how much production it takes to reach the minimum long-run average total cost.
The average product curve is: A: decreasing before reaching its minimum, then increasing. B: increasing before reaching its peak, then decreasing. C: fixed even as the number of workers increases. D: decreasing as the number of workers increases.
B: increasing before reaching its peak, then decreasing Reason: The average product curve increases for the first few workers, then begins to decrease after diminishing marginal returns takes effect.
A company currently producing 10 air conditioners each day has daily total costs of $1,500. Producing an additional air conditioner will increases costs by $250 daily. What are the total daily costs for the firm if they produce the 11th11th air conditioner? A: $1,500 B: $250 C: $1,250 D: $1,750
D: $1,750 Reason: The total cost of the firm will be $1,750 if the firm produces the 11th11th air conditioner. We calculate this by adding the marginal cost of the 11th11th unit to the total cost of producing 10 units.
Which of the following is a source of economies of scale for a firm? A: A decrease in the price of output B: An increase in the price of raw materials C: A decrease in the size of plant D: An increase in the specialization of labor
D: An increase in the specialization of labor
A firm is reducing their output from 2,000 units to 1,000 units. This decision results in a reduction in the long run average cost from $300 to $200. What can be said about this firm? A: The firm is experiencing economies of scale. B: The firm is experiencing profitable returns to scale. C: The firm is experiencing constant returns to scale. D: The firm is experiencing diseconomies of scale.
D: The firm is experiencing diseconomies of scale. Reason: When output is reduced the LRATC falls. This occurs if the firm is experiencing diseconomies of scale, the upward sloping portion of the LRATC is upward sloping.
Marginal product is the: A: total output produced as a result of utilizing one more unit of a fixed resource. B: total output produced as a result of utilizing one more unit of a variable resource. C: additional output produced as a result of utilizing one more unit of a fixed resource. D: additional output produced as a result of utilizing one more unit of a variable resource.
D: additional output produced as a result of utilizing one more unit of a variable resource.
Total revenue minus the explicit and implicit costs of production is _____ profit. A: accounting B: normal C: interior D: economic
D: economic
Total product divided by the number of units of a resource employed gives the _______________ product of the resource. (Use one word for the blank.)
Blank 1: average
When the marginal product increases, the marginal ___________________ declines. (Use one word for the blank.)
Blank 1: cost
Explicit costs are also known as ______________ (direct/opportunity) costs.
Blank 1: direct
The total amount of output produced with a given amount of resources is known as: A: total revenue. B: marginal product. C: total product. D: total cost.
C: total product.
Total ___________ costs change with output, whereas total _________________ costs do not.
Blank 1: variable Blank 2: fixed
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 $_______________.
Blank 1: 30000 or 30,000
_________________of scale is a condition in which the long-run average total cost of production increases as production increases.
Blank 1: Diseconomies
The cost associated with an additional unit of output is called _________ (marginal/average) cost. (Choose your answer from the options given in the brackets)
Blank 1: marginal
Zero accounting profit means that the value of economic profit is ____________.
Blank 1: negative
A period of time in which at least one input of production is fixed is known as the: A: long term. B: long run. C: short run. D: short term.
C: short run.
Average ________________ cost always declines as a firm produces more output.
Blank 1: fixed
Total cost equals total _________________ cost plus total ___________ cost. (Remember enter only one word per blank.)
Blank 1: fixed Blank 2: variable
The average fixed cost always declines with additional output while the average ____________ and average ________________ costs decline and then increase.
Blank 1: fixed Blank 2: variable
When the marginal product increases the marginal cost of production ________________ .
Blank 1: falls, declines, or decreases
Suppose a snowboard manufacturer increases its output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $100 to $110. The marginal cost of producing an extra snowboard is $________________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 10 or 10.0
A person who has been managing a dry cleaning store for $30,000 per year decides to open her 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 revenues of the store during the first year of operation are $100,000. The total economic profit is $_____________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 1000 or 1.000
Suppose a snowboard manufacturer increases it output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $120 to $145. The marginal cost of producing an extra snowboard is $._____________ (Only enter number; the $ sign has been provide for you.)
Blank 1: 25 or 25.0
_____________ profit consists of revenue minus implicit and explicit costs.
Blank 1: Economic
_________________ (Opportunity/Marginal) cost is the cost of the next best alternative that is foregone.
Blank 1: Opportunity
Positive __________ profits encourage more firms to enter the market to produce goods and services.
Blank 1: economic
Total revenue minus the explicit and implicit costs of production is ___________ profit
Blank 1: economic
The lowest level of output at which the long-run average total cost is minimized is called minimum ________________(one word) scale.
Blank 1: efficiency
Positive economic profit encourage more firms to ___________ (enter/exit) the market to produce goods and services.
Blank 1: enter
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.
Blank 1: explicit Blank 2: implicit
_______________costs are also known as accounting costs whereas _____________ costs are the opportunity costs of using owned resources.
Blank 1: explicit Blank 2: implicit
Monetary payments made by individuals, firms ,and governments for the use of others' land, labor, capital, and entrepreneurial ability are __________________ costs.
Blank 1: explicit or accounting
Increasing marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is ____________ (greater/smaller) than that of the previous variable resource.
Blank 1: greater
The opportunity costs of using owned resources are ____________ costs.
Blank 1: implicit
To determine the true cost associated with the production of goods or services, ________________(implicit/average) costs should be taken into account.
Blank 1: implicit
An opportunity cost is associated with any cost whether it is an ______________ cost or an ______________ cost.
Blank 1: implicit Blank 2: explicit
Decreasing marginal returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is ____________ than that of the previous variable resource.
Blank 1: less, smaller, lower, or lesser
When the marginal ___________ increases the marginal cost of production declines.
Blank 1: product
A curve showing the average total cost for different levels of output when at least one input of production is fixed typically plant capacity is the ________________-run average cost curve.
Blank 1: short
Being able to calculate ____________ product average product and marginal product is important to operate efficiently and maximize profits.
Blank 1: total
Costs that change with the amount of output produced are _______________ costs.
Blank 1: variable
The marginal cost curve must intersect both the average ___________ cost and average _______________ cost curves at their respective minimum points
Blank 1: variable Blank 2: total
The information below shows the relationship between the number of workers and the amount of computer chips they can produce. Computer Chip Factory Labor and Production Levels Labor (#of workers) - Total Product (computer chips) ----------------------------------------------------------------------- 0 0 1 100 2 250 3 450 4 550 What is the average product when there are two workers? A: 150 computer chips B: 200 computer chips C: 125 computer chips D: 250 computer chips
C: 125 computer chips Reason: The average product of two workers is calculated as the total product of two workers divided by the number of workers. Two workers produce 250 units, so the average product is 125 (250 units / 2 workers).
Which of the following is a way that firms can avoid paying fixed costs in the short run? A: Firms can rely solely on salaried employees. B: Firms can increase output. C: Firms cannot avoid fixed costs in the short run. D: Firms can shut down and produce nothing.
C: Firms cannot avoid fixed costs in the short run.
Total variable cost divided by the amount of output produced is equal to: A: average fixed cost. B: average total cost. C: average variable cost. D: marginal cost.
C: average variable cost.
Costs that do not change with the amount of _____ produced are fixed costs. A: profit B: revenue C: output D: innovation
C: output
Total cost per unit is equal to: A: average total cost. B: marginal cost. C: average variable cost. D: average fixed cost.
A: average total cost.
Marginal values drive average values because: A: if the average value exceeds the marginal value the average value will rise. B: if the marginal value is above or below the average value it will pull the average value up or push it down. C: if the marginal value does not change the average value the marginal value must be zero. D: if the marginal value is equal to zero the average value will rise or fall.
B: if the marginal value is above or below the average value it will pull the average value up or push it down.
One potential reason diseconomies of scale could exist is that: A: a firm cannot afford to expand. B: inputs are not as productive as the inputs used before. C: a firm has exhausted constant returns to scale. D: a firm can buy inputs less expensively.
B: inputs are not as productive as the inputs used before.
When deciding whether to keep production at the current level of output or produce more, a firm will need to compare the: A: average total cost and price. B: marginal cost and marginal benefit. C: total cost and total revenue. D: average variable cost and average fixed cost.
B: marginal cost and marginal benefit.
The marginal cost curve shows the relationship between: A: total cost and marginal cost. B: marginal cost and output. C: output and number of workers. D: marginal cost and number of workers.
B: marginal cost and output.
The extra or additional cost associated with the production of an additional unit of output is the: A: total cost. B: marginal cost. C: marginal revenue. D: average cost.
B: marginal cost.
A profit-maximizing firm should produce a level of output where: A: total revenue equals total cost. B: marginal revenue equals marginal cost. C: marginal revenue exceeds marginal cost. D: marginal cost exceeds marginal revenue.
B: marginal revenue equals marginal cost.
Being able to calculate total product average product and marginal product is important: A: to keep competition in check. B: when filing taxes. C: to operate efficiently and maximize profits. D: for determining demand and supply.
C: to operate efficiently and maximize profits.
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 _____________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 60000 or 60,000
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 $ ______________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 90000 or 90,000
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 $____________. (Only enter number; the $ sign has been provide for you.)
Blank 1: 90000 or 90,000
_________ marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.
Blank 1: Increasing
A curve showing the _____________ total cost for different levels of output when at least one input of production is fixed typically plant capacity is the short-run average cost curve.
Blank 1: average
In addition to total cost, it is useful to calculate _____________ cost because it is more useful for managing. (Enter only one word in the blank.)
Blank 1: average
The amount of output produced per unit of a resource employed is the ______________ product. (Answer in one word)
Blank 1: average
A firm is reducing their output from 2,000 units to 1,000 units. This decision results in a reduction in the long run average cost from $300 to $200. What can be said about this firm? A: The firm is experiencing constant returns to scale. B: The firm is experiencing profitable returns to scale. C: The firm is experiencing diseconomies of scale. D: The firm is experiencing economies of scale.
C: The firm is experiencing diseconomies of scale. Reason: When output is reduced the LRATC falls. This occurs if the firm is experiencing diseconomies of scale, the upward sloping portion of the LRATC is upward sloping.
The variable cost curve, at each output level, falls: A: above the marginal cost curve by the amount of the total cost curve. B: below the marginal cost curve by the amount of the total cost curve. C: below the total cost curve by the amount of the fixed cost curve. D: above the total cost curve by the amount of the fixed cost curve.
C: below the total cost curve by the amount of the fixed cost curve. Reason: The total cost curve lies above the variable cost curve with the difference being the amount of fixed costs.
For quantities occurring before the marginal cost curve and average total cost curve intersect, the average total cost curve will be: A: increasing. B: negative. C: decreasing. D: at its minimum.
C: decreasing Reason: For quantities before the intersection point, ATC will decrease. At the intersection of MC and ATC, ATC will be at its minimum. For quantities beyond the intersection ATC will increase.
The marginal cost curve is: A: decreasing for all levels of output. B: increasing for low levels of output, then beings decreasing. C: decreasing for low levels of output, then begins increasing. D: increasing for all levels of output.
C: decreasing for low levels of output, then begins increasing. Reason: The marginal cost curve begins by decreasing, but eventually diminishing marginal returns causes the marginal cost to increase for higher levels of output.
Minimum-efficiency scale refers to the: A: lowest level of output at which the short-run average total cost is minimized. B: highest level of output at which the long-run average total cost is minimized. C: lowest level of output at which the long-run average total cost is minimized. D: highest level of output at which the short-run average total cost is minimized.
C: lowest level of output at which the long-run average total cost is minimized.
The long-run average total cost curve of a firm is plotted using the firm's: A: maximum short-run average cost of each level of output. B: maximum marginal cost for each level of output. C: minimum short-run average cost for each level of output. D: minimum marginal cost for each level of output.
C: minimum short-run average cost for each level of output.
Economic profit consists of _____; accounting profit consists of _____. A: revenue plus implicit and explicit costs; revenue plus implicit and explicit costs B: revenue minus explicit costs; revenue minus implicit and explicit costs C: revenue minus implicit and explicit costs; revenue minus explicit costs D: revenue plus explicit costs; revenue plus implicit and explicit costs
C: revenue minus implicit and explicit costs; revenue minus explicit costs
The table below shows the production cost information for Raincoat, Inc. RAINCOATS - TOTAL COST - MARGINAL COST ------------------------------------------------------------- 0 $50.00 - 1 $55.00 $5.00 2 $57.50 $2.50 3 ? $5.00 What is the total cost of production associated with the 3rd raincoat? A: $2.50 B: $5.00 C: $60.00 D: $62.50
D: $62.50 Reason: The total cost of production is calculated by adding the marginal cost of producing the 3rd3rd coat to the total cost of producing the 2nd2nd. The total cost of producing 3 coats is $62.50 ($5.00 + $57.50).
If a business owner can produce more as a whole with an additional worker even if the marginal product associated with that worker is lower than the marginal product associated with the previous worker then there are: A: zero marginal returns. B: increasing marginal returns. C: negative marginal returns. D: diminishing marginal returns.
D: diminishing marginal returns.
A condition in which the long-run average total cost of production decreases as production increases is called: A: constant returns to scale. B: diseconomies of scale. C: minimum-efficiency scale. D: economies of scale.
D: economies of scale.
Because the cost of a container is proportional to its surface area, by doubling the diameter of a container, a producer can: A: compensate for poor management B: overcome diminishing marginal returns. C: avoid the mathematics of circles. D: experience economies of scale.
D: experience economies of scale.
The marginal cost is the: A: per-unit cost associated with the production of an extra unit of output. B: per-unit cost of producing output. C: per-unit cost of purchasing inputs required for the production of output. D: extra or additional cost associated with the production of an additional unit of output.
D: extra or additional cost associated with the production of an additional unit of output.
If a company decides to produce zero units of output,: A: it can avoid all costs. B: it still has to pay taxes. C: it still has to pay variable costs of production. D: it still has to pay fixed costs of production.
D: it still has to pay fixed costs of production.
When examining the cost curves for a firm, the minimum average variable cost occurs at the output level where: A: marginal cost equals average total cost. B: average total cost equals price. C: average total cost equals average variable cost. D: marginal cost equals average variable cost.
D: marginal cost equals average variable cost. Reason: The minimum AVC occurs at the intersection of the MC and AVC curves. If MC is greater than AVC, AVC is increasing. If MC is less than AVC, AVC is decreasing.
The long-run average total cost curve of a firm is plotted using the firm's: A: minimum marginal cost for each level of output. B: maximum short-run average cost of each level of output. C: maximum marginal cost for each level of output. D: minimum short-run average cost for each level of output.
D: minimum short-run average cost for each level of output.
The lowest level of output at which the long-run average total cost is minimized is called: A: diseconomies of scale. B: constant returns to scale. C: economies of scale. D: minimum-efficiency scale.
D: minimum-efficiency scale.