ECON Test #3 MODULE 1
Variable Costs
costs that change with the amount of output produced
Fixed Costs
costs that do not change with the amount of output produced
When the marginal product increases, the marginal cost of production...
declines
Positive ________ profits encourage more firms to enter the market to produce goods & services
economic
Economies of scale can result from a variety of factors, including...
-lower costs of inputs as firms purchase larger quantities -productivity gains from more specialized labor
Total Revenue
Price x Quantity
Marginal Costs
The extra or additional cost of producing an additional unit of output
The Marginal Cost Curve is Always Shaped Like...
a U
Increasing Marginal Returns
a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource
Decreasing Marginal Returns
a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource
Economies of Scale
a condition in which the long-run average total cost of production decreases as production increases
Diseconomies of Scale
a condition in which the long-run average total cost of production increases as production increases
Long Run
a period of time in which all inputs are varied
Short Run
a period of time where at least one input is fixed
When the marginal cost falls below the average cost, the _____________ cost should be decreasing
average
The true cost of an economic activity such as the production of goofs & services must include...
implicit cost
The opportunity cost of using owned resources are...
implicit costs
One reason for diseconomies of scale is...
increasing opportunity costs
When making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?
marginal cost & marginal revenue
A profit-maximizing firm should produce a level of output where...
marginal revenue = marginal cost
Being able to calculate total product, average product, and marginal product is important to...
operate efficiently and maximize profits
Total Revenue
price x quantity
Explicit Costs are also known as...
seen costs
Law of Diminishing Marginal Returns
states that at some point, adding an additional factor of production results in smaller increases in output
Marginal Product
the additional output produced as a result of utilizing one more unit of a variable resource
Average Product
the amount of output produced per unit of a resource employed
Economic Costs
the costs associated with the use of resources
Accounting Profit
total revenue - explicit cost of production
Economic Profit
total revenue - total implicit and total explicit costs of production
Implicit Costs are also known as...
unseen costs
Total ______ costs change with output, whereas total ______ costs do not.
variable, fixed