Ch. 11 Firm Strategy
What is negative technological change?
A firm produces less output with the same inputs
An example of technological change is
A firm rearranging layout of a store, a firm installing faster or more reliable machinery, a firm hiring less skilled workers
If the hospital decides to expand, it will be experiencing
diseconomies of scale
Any cost that remains unchanged as output changes represents a firm's
fixed cost
When the average product of labor is decreasing, the average product of labor is ____ the marginal product of labor
greater than
Which costs are affected by the level of output produced?
variable costs
The marginal cost curve is
A U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling
How are implicit costs different from explicit costs?
An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary
All of the following measures reach their minimum points when equal to the value of marginal cost, except one. Which cost measure?
Average Fixed Cost
What is a production function?
Illustrating the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs
Henry Ford expected to produce at a lower average cost at his plant. Explain whether you agree or disagree
It is incorrect, Ford was not able to produce cars at a lower average cost due to diseconomies of scale
The federal government starts to levy a $20 per passenger carbon emissions tax on all commercial air travel
Marginal cost would INCREASE, avc would INCREASE, afc would remain UNCHANGED, and atc would INCREASE
Southwest signs a new contract with the transport workers union that requires airline to increase wages for its flight attendants
Marginal cost would INCREASE, avg variable cost would INCREASE, afc would remain UNCHANGED, and atc would INCREASE
Southwest decides on an across the board 10 percent increase in executive salaries
Marginal cost would remain UNCHANGED, avc would remain UNCHANGED, afc would INCREASE, and atc would INCREASE
Southwest decides to double its television advertising budget
Marginal cost would remain UNCHANGED, avc would remain UNCHANGED, afc would increase, and average total cost would INCREASE
Sally's GPA is higher than last semesters, but cumulative went down. Explain how this is possible
Sally's GPA for this semester is lower than her cumulative GPA
When a positive technological change occurs,
The same output can be produced with fewer inputs, and more output can be produced from the same inputs
Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing?
Yes. If marginal cost is less than average total cost, then average total cost will be decreasing
What cost measure is equal to AFC + AVC?
average total cost
Company incurs a cost for machinery, in short run is fixed. What happens to this cost in the long run?
becomes a variable cost
Which of the following is most likely to a variable cost for a business firm?
cost of shipping products
The payment she makes on her fire insurance policy is a ____ cost
fixed
A nonmonetary opportunity cost is an
implicit cost
Which of the following is most likely to be a fixed cost for a farmer?
insurance premiums on property
When the average product of labor is increasing, the average product of labor is _____ the marginal product of labor
less than
If workers are fixed, restaurant space is variable, and ovens are fixed, then Sheri is producing pizza in the
short run
As output increases, the vertical distance between average total cost and average variable cost curves gets ____ and equals _____
smaller; average fixed cost
Them marginal product of labor potentially increases due to
specialization
What does the short-run production function hold constant?
the amount of capital
The production function is the relationship between
the inputs employed by a firm and the maximum output it can produce with those inputs
The payment she makes to buy pizza dough is a ____ cost
variable
Any cost that changes as output changes represent's a firm's
variable cost
