Micro Economics Test 3
TRUE or FALSE? If the marginal cost curve is rising, so is the average total cost curve.
False
TRUE or FALSE? The average total cost curve is unaffected by diminishing marginal product.
False
TRUE or FALSE? The fact that many decisions are fixed in the short run but variable in the long run has little impact on the firm's cost curves.
False
TRUE or FALSE? Variable costs equal fixed costs when nothing is produced.
False, FC > VC
TRUE or FALSE? Fixed costs are those costs that remain fixed no matter how long the time horizon is.
False, in the short-run
TRUE or FALSE? The shape of the total cost curve is unrelated to the shape of the production function.
False, increasing at decreasing rate
TRUE or FALSE? Average total cost reveals how much total cost will change as the firm alters its level of production.
False, marginal cost
TRUE or FALSE? Diminishing marginal product exists when the total cost curve becomes flatter as outputs increases.
False, steeper as outputs increases
TRUE or FALSE? In the long run, a factory is usually considered a fixed input.
False, there are no fixed inputs
TRUE or FALSE? A second or third worker may have a higher marginal product than the first worker in certain circumstances.
True
TRUE or FALSE? As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.
True
TRUE or FALSE? Average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost.
True
TRUE or FALSE? Average variable cost is equal to total variable cost divided by quantity of output.
True
TRUE or FALSE? Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.
True
TRUE or FALSE? Diminishing marginal product exists when the production function becomes flatter as inputs increase.
True
TRUE or FALSE? Fixed costs are incurred even when a firm does not produce anything.
True
TRUE or FALSE? In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.
True
TRUE or FALSE? The cost of producing an additional unit of a good is not the same as the average cost of the good.
True
TRUE or FALSE? The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve.
True
TRUE or FALSE? The shape of the marginal cost curve tells a producer something about the marginal product of her workers.
True
TRUE or FALSE? The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.
True
TRUE or FALSE? Variable costs usually change as the firm alters the quantity of output produced.
True
TRUE or FALSE? When trying to understand the decision making process of different firms, economists assume that people think at the margin.
True
TRUE or FALSE? The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.
True, ATC= AVC + AFC
TRUE or FALSE? When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.
True, min ATC
Total revenue - explicit cost = _____________
accounting profit
Total revenue minus total cost, including both explicit and implicit costs.
economic profit
The property whereby long-run average total cost falls as the quantity of output increases
economies of scale
The quantity of output that minimizes average total cost
efficient scale
Input costs that require an outlay of money by the firm
explicit costs
Cost in short-run = _________
fixed
Costs that do not vary with the quantity of output produced (ex. rent)
fixed costs
Input costs that do not require an outlay of money to the firm
implicit costs
The increase in total cost that arises from an extra unit of production.
marginal costs
The increase in output that arises from an additional unit of input.
marginal product
Change in output/change in labor = _________
marginal product of labor
The relationship between quantity of inputs used to make a good and the quantity of output of that good. (determined by technology)
production function
Total revenue - total cost = ___________
profit
Costs that do vary with the quantity of output produced. (comes from hiring more workers)
variable costs
Fixed costs divided by the quantity of output.
average fixed costs
Total cost divided by the quantity of output.
average total costs
Variable costs divided by the quantity of output.
average variable costs
The property whereby long-run average total cost stays the same as the quantity of output changes.
constant returns to scale
The property whereby the marginal product of an input declines as the quantity of the input increases.
diminishing marginal product
The property whereby long-run average total cost rises as the quantity of output increases.
diseconomies of scale
The market value of the inputs a firm uses in production.
total cost
Fixed costs + variable costs = ______________
total costs
The amount a firm receives for the sale of its output. (quantity sold * price)
total revenue