ECON1101: Chapter 7

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

either total cost or variable cost

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

Refer to the graph below. Based on the information illustrated in the graph, which of the following is correct?

the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

______________ include all of the costs of production that increase with the quantity produced.

Variable

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

$1.00

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

35%

Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct?

A = 20; E = 5

_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

Agglomeration factors

In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.

acquire energy efficient production technologies

A situation where the level of output, scale and average costs are all rising is called

both a and b

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

constant returns to scale

The graph below illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's

decreasing marginal costs.

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change,

Economies of scale may arise from all but one of the following. Which one is it?

government economic subsidies protect firms from competition to avoid losses

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.

upward-sloping; more costly to produce

In the US economy, nearly half of all the workers employed by private firms work at

18,000 large firms that employ more than 500 workers.

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

the quantity of output

In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.

diseconomies of scale

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.

economies of agglomeration; corresponding diseconomies