3-1: LearnSmart 3- Chapter 5

Economic profit = (total revenue) - (total economic cost) (total economic cost) - (total revenue) (total revenue) - (explicit cost) (explicit revenue) - (explicit costs)

(total revenue) - (total economic cost)

Which of the following explains the concept of explicit costs? A firm's monetary payments received for the use of resources owned by the firm. A firm's monetary payments that self-employed resources could have earned in their best alternative. 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.

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.

Which statement below is true of the variable cost and the total cost of production? Both variable and total costs increase at first by increasing amounts and then by decreasing amounts as output increases. Both variable and total costs increase at first by decreasing amounts and then by increasing amounts as output increases. Both variable and total costs decrease at first by increasing amounts and then by decreasing amounts as output increases. Both variable and total costs decrease at first by decreasing amounts and then by increasing amounts as output increases.

Both variable and total costs increase at first by decreasing amounts and then by increasing amounts as output increases.

Capacity is the concept that resource constraints place a ceiling on minimum output marketable output average output potential output

potential output

______ is the concept that resource constraints place a ceiling on potential output. Productivity Cost of production Capacity Efficiency

Capacity

Which of the following are the factors of production? Money Stocks, bonds, and other financial assets Capital Entrepreneurial ability Land Labor

Capital Entrepreneurial ability Land Labor

How do variable costs move in relation with output? Proportionately Unrelated Inversely Directly

Directly

How do variable costs move in relation with output? Unrelated Directly Inversely Proportionately

Directly

Resource inputs used to produce goods and services include: Entrepreneurial ability Money Labor Capital Land Stocks, bonds, and other financial assets

Entrepreneurial ability Labor Capital Land

_____ costs are the monetary payments a firm makes to those who provide the resources or inputs to production.

Explicit

______ and ______ costs are what firms pay for the inputs they use when producing output. Implicit; opportunity Explicit; implicit Variable; marginal Explicit; accounting

Explicit; implicit

Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)? Resource inputs Factory rental payments Labor Leases on machinery

Factory rental payments Leases on machinery

Which of the following are examples of variable costs? (Select all that apply.) Fuel Materials Labor Equipment depreciation Rental payments

Fuel Materials Labor

Which are the two most important costs a firm needs to know to make profitable production decisions? marginal cost fixed cost total cost average total cost

marginal cost average total cost

What types of costs do firms incur when producing products? Implicit Explicit Private

Implicit Explicit

_____ cost equals a change in total cost divided by a change in total output.

Marginal

_____ cost is the value of the best forgone alternative when we make a decision.

Opportunity

Which group of costs is the most accurate example of variable cost? Payments for power, transportation services, insurance premiums, and depreciation Payments for materials, fuel, and transportation services Payments for rent, materials, and training Payments for materials, fuel, labor, rent, and interest

Payments for materials, fuel, and transportation services

Which are the two production time periods? Short run Supply Current period Future period Long run Demand

Short run Long run

Economists distinguish between which two production time periods? Short run and long run Immediate run and short run Long run and distant future There are not two conceptual periods.

Short run and long run

The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as marginal cost demand supply profit maximization

Supply

A firm's total costs of producing a specific output depend on which of the following? The market value of the needed resources required to produce a given output. The range of resource possibilities. The quantities of resources required to produce a given output. The quality of resources given up to produce another good or service.

The market value of the needed resources required to produce a given output. The quantities of resources required to produce a given output.

What factors are involved in a firm's total cost of producing a specific output? The price and quantity of the resources needed to produce that output Only the quantity of resources needed to produce that output Explicit costs only Only the price of the resources needed to produce that output

The price and quantity of the resources needed to produce that output

What is the definition of total cost? The sum of the variable costs at each level of output The sum of all resource costs used to produce a good or service The average of all resource costs used to produce a good or service The sum of the fixed costs at each level of output

The sum of all resource costs used to produce a good or service

_____ cost is the sum of all resources used to produce a good or service.

Total

What method can be used to calculate average total cost? Total cost divided by total output (Q) Total fixed cost divided by total output (Q) Total variable cost divided by total output (Q)

Total cost divided by total output (Q)

Average total cost equals total cost divided by total ______. costs output revenue fixed costs

output

The average total cost curve is U-shaped. downward sloping throughout. L-shaped. upward sloping throughout.

U-shaped

______ costs are those costs that change with the level of output. Fixed Variable Implicit Economic

Variable

A technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs is known as a production function efficiency capacity the supply curve

a production function

If you purchase the factory that you are currently using, the ______ cost will change. explicit opportunity accounting net accounting

accounting

The productivity of any factor of production depends on the costs of other outputs available to it. amount of other outputs available to it. amount of other resources available to it. costs of other resources available to it.

amount of other resources available to it.

Which of the following curves first falls and then rises? fixed cost average total cost total cost marginal physical product

average total cost

Which of the following curves first falls and then rises? total cost marginal physical product fixed cost average total cost

average total cost

The two most important costs a firm needs to understand to make profitable production decisions include total cost fixed cost average total cost marginal cost

average total cost marginal cost

Variable costs are those expenses that increase when output declines and decrease when output increases. change with the level of output. consider the average cost over a period of time. don't change with the level of output.

change with the level of output.

The law of ______ states that as successive units of a variable input are added to a fixed input, beyond some point the marginal physical product will decline. diminishing labor diminishing returns diminishing costs diminishing utility

diminishing returns

Assuming other inputs 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 law of supply. diminishing costs. diminishing returns. diminishing utility.

diminishing returns.

The ______ is the value or worth of all resources used to produce the good or service. economic cost absolute cost implicit cost explicit cost

economic cost

Economic costs = explicit costs + implicit costs explicit costs - implicit costs implicit costs explicit costs

explicit costs + implicit costs

Factory rental payments, sewing machine lease payments, and interest on a firm's debts are all examples of _____ costs.

fixed

The decision to build, buy, or lease plant and equipment or the decision to enter or exit an industry is known as the _____ decision.

investment

The decision to build, buy, or lease plant and equipment or the decision to enter or exit an industry is known as the opportunity cost production decision productivity decision investment decision

investment decision

The change in total cost divided by the change in output is: marginal physical product marginal output marginal cost marginal revenue

marginal cost

The ability and willingness to ______ specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as supply. purchase increase produce decrease

produce

A technological relationship expressing the maximum quantity of a good attainable from different combinations of resources is a _____ function.

production

The measure output per unit of input is called: a production function. outputs. inputs. productivity.

productivity

Total revenue minus total cost is: the law of diminishing returns profit marginal cost total output

profit

Variable costs _____ (increase/decrease) with increases in output.

rise, increase, change, or increases

The choice of how intensively to use available plant and equipment in the short run is referred to as the economic decision the investment decision the production decision the start-up decision

the production decision

The selection of the short-run rate of output (with existing plan and equipment) is referred to as the economic decision the start-up decision the investment decision the production decision

the production decision

Economic costs are defined as the value of all resources used to produce a good or service implicit costs the lowest value paid to a resource used in the production of a good or service explicit plus economic costs

the value of all resources used to produce a good or service

The market value of all resources used to produce a good or service is called _____ cost.

total

The market value of all resources used to produce a good or service is called: total cost average total cost variable cost fixed cost marginal cost

total cost

Profit is defined as: total cost multiplied by output total revenue minus total cost total revenue plus total cost total cost minus total revenue

total revenue minus total cost

Economic profit is total economic cost minus total revenue accounting profits minus explicit costs total revenue minus total economic cost total revenue minus explicit cost

total revenue minus total economic cost

The total cost and variable cost curves are ______, whereas the fixed cost curve is ______. downward sloping; horizontal upward sloping; downward sloping upward sloping; horizontal horizontal; upward sloping

upward sloping; horizontal