Chapter 9 LearnSmart - Applied Economics

Economic Cost

The ______ of any resource used to produce a good is the value or worth the resource would have in its best alternative use

Opportunity Cost

the value or worth the resource would have in its best alternative use

Accounting Profit

what remains after a firm has paid in explicit costs

Decision Making

As a from grows, _____ may slow, impairing efficiency and raising average total costs

Economic Costs

the explicit and implicit payments a firm must make, or the incomes it must provide, to attract the resources it needs away from alternative production opportunities

Cost Curves

Changes in resource prices or technology will cause a shift for _____

Marginal Cost

Equals the change or difference in total cost divided by the change or difference in output

Average Fixed Cost

Equals total fixed cost divided by output

Average Variable Cost

Equals total variable cost divided by total output

Variable Costs

Expenses that change with the level of output

Fixed Costs

Expenses that do not change as output changes

Natural Monopoly

A relatively rare market situation in which average total cost is minimized when only one firm produces the good

Long Run

A time period during which a firm can adjust the quantities of all the resources that it employs, including plant capacity

Total Cost

The sum of the fixed cost and variable cost at each level of output

True

True or False: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust

True

True or False: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources

True

True or False: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable

Law of Diminishing Marginal Returns

as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline