Week 4 Quiz ECON

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

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

Total fixed cost falls as output expands

false

Refer to the diagram above. 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

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?

variable costs

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

variable costs

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

marginal cost

________________________ arises where many firms are competing in a market to sell similar but differentiated products.

monopolistic competition

In economics, a firm that faces no competitors is referred to as _________________.

monopoly

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 gallery

Variable inputs are those whose

quantity changes as the level of output changes

Fixed inputs are those whose

quantity remains constant regardless of the level of output

Which of the following should typically be ignored because spending has already been made and cannot be changed?

sunk costs

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

total revenue

The table above sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?

A = 42, E = 12

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost