MBF Connect - Chapter 9 Homework

When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?

$125

Which of the following explains the concept of explicit costs?

- A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services. - A firm's monetary payments made for the use of resources owned by others.

Your company's total sales revenue for the month is $150,000; the costs to produce your products are $12,000 for rent, $6,000 for utilities, and $42,000 for employee wages. What is your accounting profit?

90,000

With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

A decline in average total cost (ATC)

Which of the following illustrates constant returns to scale?

A firm's 10% increase in given inputs, causing a proportionate 10% increase in output

Marginal cost includes which of the following?

All the cost associated with producing the last unit of output The cost savings resulting from not producing the last unit of output

Which of the following statements explain why the average variable cost curve is U-shaped?

As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines. At low levels of output, production is relatively inefficient and costly.

What is meant by the phrase "spreading the overhead"?

As production increases, average fixed cost declines.

Which of the following is an example of labor specialization?

Assigning each worker one task instead of five or six Hiring more workers in order to subdivide tasks

Which of the following is true of average fixed cost when output increases?

Average fixed cost declines as output increases.

What methods can be used to calculate average total cost?

Average fixed cost plus average variable cost Total cost divided by output (Q)

Which of the following is true where the marginal product curve intersects the average product curve?

Average product is at its maximum.

Which curve first falls and then rises?

Average variable cost curve

How is total cost calculated?

By adding total fixed cost and total variable cost

How is marginal cost (MC) calculated?

By dividing the change in total cost by the change in output

Which best characterizes variable costs?

Costs that change with the level of output

The U-shape of the long-run average-total-cost curve results from which of the following?

Diseconomies of scale Economies of scale

______ costs are the monetary payments a firm makes to purchase resources from others..

Explicit

Which of the following result from managerial specialization?

Greater efficiency Lower unit costs

Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?

In the long run all resources and inputs are variable.

How does labor specialization allow a worker to become more proficient?

It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.

Greater labor specialization has which of the following effects?

It eliminates the loss of time that occurs whenever a worker shifts from one task to another.

What happens to average product as additional units of labor are added to a fixed plant?

It increases, reaches a maximum, and then decreases.

Which of the following best describes the average variable cost curve?

It is U-shaped.

A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?

LEARNING By doing

A planning curve is another term for which of the following?

Long run average-total-cost curve

By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?

Lower its average total costs

What happens to marginal product when total product is increasing but at a decreasing rate?

Marginal product is positive but falling.

Which of the following are examples of variable costs?

Materials costs Transportation services payments Fuel costs

Which group of costs is the most accurate example of variable cost?

Payments for materials, fuel, power, and transportation services

Which best describes economic costs?

Payments that must be made to obtain a resource

Which of the following are examples of fixed costs?

Rental payments Interest on a firm's debts

What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?

The average-fixed-cost curve remains the same. The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.

What is the primary cause of diseconomies of scale?

The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer

Which of the following sections of a long-run average total cost curve depicts constant returns to scale?

The flat section

Which of the following best illustrates diseconomies of scale?

The increase in average total costs as a firm expands the size of its plant in the long run

What does the long-run average-total-cost curve show?

The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size

What is the definition of total product (TP)?

The total quantity, or total output, of a particular good or service produced

How is average fixed cost determined?

Total fixed cost divided by output

When is marginal cost at its minimum?

When marginal product product is at its maximum

Which industry requires the most time for its firms to alter plant capacity?

aircraft manufacturing

Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

amount of machinery, size of the factory

Average fixed cost equals total fixed cost divided by the ______.

amount of output

An increase in the price of labor has no effect on which cost curve?

average fixed cost

What happens to average product when marginal product exceeds it?

average product continues to rise

Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?

average total cost

The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.

diminishing

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the effects of the law of ______.

diminishing returns

What is another term for economies of scale?

economies of mass production

Accounting profit is what remains after a firm has paid its _______ costs.

explicit

True or false: Important determinants of an industry's structure are economies of scale and revenue.

false

When total product declines, marginal product ______.

is negative

Over what period of time can an industry and firms in that industry adjust all resource inputs used?

long run

Economies of scale explain the downward-sloping part of the ______ curve.

long run ATC

A marketing supervisor works in a small plant where she performs a range of duties. As the company grows and hires additional supervisors, she is able to spend the bulk of her time in her area of expertise. In this example, the company has increased its ______.

managerial specialization

A firm's decision about what output level to produce is typically a ______ decision.

marginal

What type of cost can be saved by not producing the last unit?

marginal

The marginal-product curve is a mirror image of the ______ curve.

marginal cost

What is the term for the extra cost of producing one more unit of output?

marginal cost

Which of the following costs can a firm control directly and immediately?

marginal costs

A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?

marginal data

If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.

marginal product

Average product declines when ______.

marginal product is less than average product

What happens to marginal product when total product is increasing at an increasing rate?

marginal product is rising

In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.

minimum efficient scale

The lowest level of output at which a firm can minimize long-run average costs is called ______.

minimum efficient scale

The size of the factory, the amount of machinery and equipment, and other capital resources define

operation and capacity

Which resource requires the most time for a firm to adjust, given a change in demand?

plant capacity

Increased labor ______ becomes more achievable as a plant increases in size.

specialization

One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines

specialization

What happens to fixed costs when the level of production output reaches zero?

they remain unchanged

What is the term for the total quantity of a specific good produced?

total product

True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.

true

When total product is at its maximum, marginal product is ______.

zero