ECON 2113 EXAM 3
The average fixed cost curve always _____ with increased levels of output.
declines
When adding another unit of labor leads to an increase in output that is smaller than increases in output that resulted from adding previous units of labor, we have the property of _______
diminishing marginal product
One would expect to observe ______ when crowded office space reduces the productivity of new workers.
diminishing marginal product of labor
Fixed costs can be defined as costs that ___ inversely with production.
do not vary
Accounting profit is equal to ____
economic profit + implicit costs.
_______ of scale often arise because higher production levels allow specialization among workers
economies
The use of specialization to achieve ______ is one reason modern societies are as prosperous as they are
economies of scale
Some costs do not vary with the quantity of output produced. Those costs are called _______
fixed costs
Total cost can be divided into two types. Those two types are _____
fixed costs and variable costs.
Longrun average total cost curves are often _______ for the same reasons that average total cost curves are often U shaped.
flat
Because of the greater ______ that firms have in the long run, all short run cost curves lie on or above the long run curve
flexibility
The fact that many decisions are fixed in the short run but variable in the long run ________
has more flexibility
An example of an ____ cost of production would be the cost of forgone labor earnings for an entrepreneur.
implicit
Fixed costs are those costs that remain fixed ______
in the short run
Average total cost is _____ whenever total cost is increasing.
increasing
Marginal cost must rise as the quantity of _____ increases.
input
The marginal product of labor is equal to the incremental cost associated with a one unit increase in _____
input
One assumption that distinguishes shortrun cost analysis from longrun cost analysis for a profitmaximizing firm is that in the short run, output ___ variable.
is
"Constant returns to scale" refers to a situation in which, for a firm, all of the firm's ______ average total cost curves are horizontal.
long run
As a firm moves along its ________, it is adjusting the size of its factory to the quantity of production
long-run average cost curve
The _____ is always flatter than the shortrun average total cost curve, but not necessarily horizontal.
longrun average total cost curve
Economists normally assume that the goal of a firm is to ________
make profit as large as possible even if it means reducing output. make revenue as large as possible.
The ______ of an input in the production process is the increase in total revenue obtained from an additional unit of that input.
marginal cost
The amount by which total cost rises when the firm produces one additional unit of output is called ______
marginal cost
The shape of the ____ curve tells a producer something about the marginal product of her workers
marginal cost
A second or third worker may have a higher ____ than the first worker in certain circumstances
marginal product
If marginal cost is rising, _____ must be falling.
marginal product
Economists normally assume that the goal of a firm is to ______
maximize profit.
Assume Jack received all A's in his classes semester. If Jack gets all C's in his classes this semester, his GPA ____
may or may not fall
The efficient scale of the firm is the quantity of output that ______ marginal product.
minimizes
The firm's efficient scale is the quantity of output that __________
minimizes average total cost.
The marginal cost curve intersects the average total cost curve at the _____ point of the average total cost curve
minimum
The marginal cost of the fifth unit of output equals the total cost of five units ____ the total cost of four units.
minus
Diminishing marginal product suggests that additional units of output become ____ costly as more output is produced.
more
Diminishing marginal product suggests that the marginal cost of an extra worker is _______
negative
Economic profit will ____ accounting profit.
never exceed
Those things that must be forgone to acquire a good are called _____
opportunity costs
A total cost curve shows the relationship between the quantity of an ____ and the total cost of production.
output produced
A _____ is a relationship between inputs and quantity of output.
production function
If a firm produces nothing, ____ will be zero.
profit
An example of a fixed cost would be _____
raw materials supplied at a government regulated price. rent paid on a factory.
When a firm is able to put idle equipment to use by hiring another worker, variable costs will ____
rise.
At all levels of production beyond the point where the marginal cost curve crosses the average variable cost curve, average variable cost _______
rises.
If marginal cost is below average total cost, then average total cost is ______
rising
Assume a certain firm regards the number of workers it employs as variable, and that it regards the size of its factory as fixed. This assumption is often realistic in the ______
short run, but not in the long run
In some cases, ______ allows larger factories to produce goods at a lower average cost than smaller factories
specialization
The firm can vary the number of workers it employs, but not the size of its factory, this assumption is often realistic for a firm in ______
the short run.
To an economist, it is conceivable that the objective that motivates an individual entrepreneur to start a business ______
to help society maximize profit
Average total cost and marginal cost are merely ways to express information that is already contained in a firm's ____
total cost
Economic profit is equal to total revenue minus the _____ of producing goods and services.
total cost
____ tells us the value of all resources used in a production process.
total cost
_____ can be added to profit to obtain total revenue.
total cost
the amount of money that a firm pays to buy inputs is called _______
total cost.
Average total cost is equal to ______
total cost/output
Total revenue equals ______
total output multiplied by price per unit of output.
The amount of money that a firm receives from the sale of its output is called ______
total revenue
Economic profit is equal to _______
total revenue - (explicit costs + implicit costs). total revenue - opportunity costs.
Accounting profit is equal to ______
total revenue - explicit cost
Profit is defined as _____
total revenue - total cost
Average total cost tells us the total cost of the _____ unit of output, if total cost is divided evenly over all the units produced.
typical
In the long run, a factory is usually considered a _______
variable cost
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. The cost of mustard are most likely to be considered _____
variable costs
Average fixed costs ___ with the amount of output a firm produces.
varies
Constant returns to scale occur when long run _____ are constant as output increases.
ATC
When marginal cost is less than average total cost, _____ must be falling.
ATC
______ keep track of the money that flows into and out of firms
Accountants
When economists speak of a firm's costs, they are ____
Always including explicit and implicit costs
When a firm is operating at an efficient scale, ____ is minimized.
Average total cost
Average variable cost is equal to ______
Total variable cost divided by quantity of output
Suppose Jan is starting up a small lemonade stand business. ____ costs for Jan's lemonade stand would include the cost of building the lemonade stand.
Fixed
______ are incurred even when a firm does not produce anything
Fixed costs
Accountants often ignore ____
Implicit costs
The average total cost curve is unaffected by _____
Increasing marginal cost
The cost of producing an additional unit of a good _____ the same as the average cost of the good
Is not
_____ reveals how much total cost will change as the firm alters its level of production
Marginal cost
Economists normally assume that people start their own businesses to help society maximize _____
Profit
Variable costs equal fixed costs when ______
Quantity equals output
The shape of the total cost curve is _____ to the shape of the production function
Related
Diminishing marginal product exists when the total cost curve becomes _____ as outputs increases
Steeper
______ usually change as the firm alters the quantity of output produced
Variable costs
When a factory is operating in the short run, it cannot ____
alter variable costs.
In the long run, inputs that were fixed in the short run _____
are variable
Marginal cost is equal to average total cost when average variable cost is ______
at it's minimum
The cost of producing the typical unit of output is the firm's ______
average total cost.
In the long run, a firm that produces and sells computers gets to choose how many workers to hire, the size of its factories, and which short run ______ curve to use.
average total cost
The _____ curve reflects the shape of both the average fixed cost and average variable cost curves
average total cost
Variable cost divided by quantity produced is _____
average variable cost
Specialization among workers occurs when quality management allows workers to ________
become familiar with only one task
The marginal product of labor can be defined as ______
change in output/change in labor.
One of the most important properties of cost curves is that for most producers , the average total cost curve ______ the marginal cost curve.
crosses
_____ occur when average fixed costs are falling.
Economies of scale
When trying to understand the decision making process of different firms, ______ assume that people think at the margin
Economists
______ require an outlay of money by the firm.
Explicit costs
Implicit costs are costs that ____
Do not require an outlay of money by the firm
_____ exists when the production function becomes flatter as inputs increase
Diminishing marginal product
______ occur when longrun average total costs rise as output increases.
Diseconomies of scale
When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at ______
efficient scale
The marginal cost curve crosses the average total cost curve at the _______
efficient scale.
When marginal cost ____ average total cost, average fixed cost must be rising.
exceeds
John owns a shoeshine business. His accountant most likely _____ wages John could earn washing windows.
excludes
The cost of accounting services would be regarded as an _____ cost.
explicit
When marginal cost is less than average total cost, average total cost is ______
falling
If the marginal cost is rising, so is the average total cost curve
false