Econ Exam #3

If we have positive economic profits, we are doing ___ than our next best alternative.

better

a point in the long run avg cost curve in which the long run avg costs do not change as you increase output

constant returns to scale

AFC ___ as we increase quantity

decreases

when ___ are present in the production process for a firm, long run average costs are increasing as output increases

diseconomies of scale

a production process is ___ efficient when that method of production produces a given level of output at the lowest possible cost

economically

when long-run average costs decrease as output increases

economies of scale

the cost of producing products for a firm are interdependent so that it's less costly for a firm to produce one good when it is already producing another and when it's an expert in selling that good or service

economies of scope

If you have an economic profit that is 0, your opportunity costs are ___ among all available alternatives

equal

we can see how the invisible hand operates in these ___

perfectly competitive markets

Total Revenue - Total Cost

profit

Why is the MC curve initially downward sloping then rising?

reflects principle of diminishing MP

- a firm is constrained in some way - the only thing that we can vary is the number of workers in the factory

short run

a production process that uses as few inputs as possible to produce a given level of output

technical efficiency

List two reasons firms experience diseconomies of scale.

1. increased monitoring costs 2. morale decreases

What is a production function? - The relationship between inputs and input costs - The relationship between any combination of inputs and the maximum output obtained from that combination. - The relationship between a firm's profits and the technology it uses in its production processes - The function of full employment - The relationship between a firm's output and its profits

- The relationship between any combination of inputs and the maximum output obtained from that combination.

MC intersects ___ and ___ at their low points

ATC and AVC

If marginal product is above average product: Average product is increasing and average variable costs are declining. Total costs will be declining. Average product is decreasing and average variable costs are declining. Average variable costs will be rising.

Average product is increasing and average variable costs are declining.

During periods of increasing marginal productivity: Marginal product is decreasing. Average product is constant, which leads to an increase in average product. Average product is increasing. Average product is decreasing.

Average product is increasing.

Once marginal product goes below average product: Average total costs will begin to rise. Average variable costs will begin to rise. Average variable costs will begin to decline. Average fixed costs will rise.

Average variable costs will begin to rise.

The market demand curve for a product produced in a perfectly competitive industry is normally: Upward-sloping. A horizontal line. Downward-sloping. A vertical line.

Downward-sloping.

All else being equal, when marginal productivity falls: Average costs must rise. Average costs must fall. Marginal costs must rise. Average costs decline rapidly. Marginal costs must fall.

Marginal costs must rise.

If the total product line slopes downwards: Marginal product is negative. Average product is increasing. Marginal product is positive. Marginal product is equal.

Marginal product is negative.

LCD screens replaced plasma screens because a LCD manufacturing facility can produce various sized screens for various products (smartphones, TVs, tablets, etc.). This is an example of a technology: Increasing diseconomies of scale Providing inconstant returns to scale none of the available answers Providing constant returns to scale Reducing indivisible setup costs

Reducing indivisible setup costs

Which of the following is most likely an example of diseconomies of scale? Alpha-Beta Inc. raised its price by 10 percent after a 5 percent increase in production costs. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. The Dynasty Co. increased production capacity by 25 percent and experienced a 50 percent increase in its total cost. The per-unit costs on Excel Publishing Company's manuals fell after it received a large order from the government.

The Dynasty Co. increased production capacity by 25 percent and experienced a 50 percent increase in its total cost.

In a perfectly competitive market: There are few firms Firms maximize per unit profits There are a large number of firms The products are heterogeneous The products are differentiated

There are a large number of firms

The market supply curve is: the same as a firm's supply curve. equal to the horizontal sum of all the firms' marginal cost curves. equal to the vertical sum of all the firms' average total cost curves. equal to the horizontal sum of all the firms' average total cost curves. equal to the vertical sum of all the firms' average total cost curves.

equal to the horizontal sum of all the firms' marginal cost curves.

There is no incentive for firms to enter or exit an industry/market when the following is occurring: Firms accounting profits are negative firms are earning excess profits firms are sustaining economic losses firms just cover their total explicit and implicit costs accounting profits are zero

firms just cover their total explicit and implicit costs

___ are a large contributing factor to economies of scale when firms increase their production quantity

indivisible set up costs

similar to fixed costs, but not called fixed costs because in the long run nothing is fixed and everything can be varied

indivisible set up costs

-when a firm can choose among all possible production techniques -they can vary anything in the production process

long run

the change in total cost associated with a change in quantity

marginal cost

the change in total revenue associated with a change in quantity

marginal revenue