econ 202 chapter 9

Marginal cost:

equals both average variable cost and average total cost at their respective minimums.

to the economist, total cost includes

explicit and implicit costs

If a firm decides to produce no output in the short run, its costs will be:

its fixed costs.

which of the following is most likely to be a fixed cost?

property insurance premiums

The law of diminishing returns describes the:

relationship between resource inputs and product outputs in the short run.

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

are $1,250.

for most producing firms

average total costs decline as output is carried to a certain level, and then begin to rise

which of the following is a short-run adjustment

a local bakery hires two additional bakers

An explicit cost is:

a money payment made for resources not owned by the firm itself.

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's explicit costs are:

$150,000.

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's economic profit is: $150,000.

$94,000.

The vertical distance between a firm's ATC and AVC curves represents:

AFC, which decreases as output increases.

In the short run:

TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.

In the short run, which of the following statements is correct?

Total cost will exceed variable cost.

Fixed cost is:

any cost that does not change when the firm changes its output.

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that:

both relatively small and relatively large firms can be viable in the industry.

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

The long-run average total cost curve:

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp:

is earning an economic profit.

Diseconomies of scale arise primarily because:

of the difficulties involved in managing and coordinating a large business enterprise.

Normal profit is:

the return to the entrepreneur when economic profits are zero.

(Consider This) If the law of diminishing returns applies to study time:

the tenth hour of study will likely be less productive than the third.

Economies and diseconomies of scale explain:

why the firm's long-run average total cost curve is U-shaped.