University of Idaho: Microeconomics 202 Ch. 7

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? A. Physical space for the gallery B. costs of purchasing artwork to sell in the gallery C. wages paid to three part-time employees D. wages paid to three part-time employees

Physical space for the gallery

______________ include all of the costs of production that increase with the quantity produced. A. Fixed costs B. Average variable costs C. Average costs D. Variable costs

Variable costs

The _____________________ curve will always lie below the curve for average total cost because average total cost includes _____________ in the calculation.

average variable cost; fixed costs

In microeconomics, the term ___________________ describes a situation where the quantity of output rises, but the average cost of production falls. A. diminishing marginal returns B. marginal cost output C. economies of scale D. diseconomies of scale

economies of scale

When __________________ exist, doubling of all inputs will result in more than doubling output, which means __________________________________________. A. labor inputs; economies-of-scale curve is U-shaped. B. economies of scale; a larger factory can produce at a lower average cost than smaller companies. C. low labor inputs; larger scale of production leads to higher costs. D. economies of scale; a smaller factory can produce at a lower average cost than a larger company.

economies of scale; a larger factory can produce at a lower average cost than smaller companies.

The _____________________________ is used to describe the additional cost of producing one more unit.

marginal cost

In order to determine the average variable cost, the firm's variable costs are divided by _______________________. A. its fixed costs B. the quantity of output C. its' average costs D. diminishing marginal costs

the quantity of output

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