Micro Ch 7

The opportunity cost of resources owned by the firm are called _________

Implicit Costs

After some level of output in the short run, each unit of the variable input yields smaller and smaller marginal product. This principle is called the ________________

Law of Diminishing Return

Exhibit 1 Cost schedule for Firm X As shown in Exhibit 1, the marginal cost of producing the fifth unit is: a. $23. b. $16. c. $24. d. $50.

A

If the firm represented in Exhibit 2 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is: a. Q1 units per week. b. Q2 units per week. c. Q3 units per week. d. Q4 units per week

A

If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, respectively. The marginal product of the fourth unit is: a. 2. b. 1. c. 37. d. 39

A

The lowest point on the average total cost curve is: a. where it intersects the marginal cost curve. b. where it intersects the average variable cost curve. c. where it intersects the average fixed cost curve. d. where marginal product is maximized

A

Payments to non-owners of a firm are called: a. implicit costs. b. indirect costs. c. explicit costs. d. economic costs.

C

Normal profit is defined as a (an): a. implicit profit. b. opportunity profit. c. the minimum profit necessary to keep a firm in business. d. All of the answers above are correct

C

__________ is the total fixed cost divided by the quantity of output produced

Average Fixed Costs

______________________ is the sum of average fixed cost and average variable cost

Average Total Costs

Total variable cost divided by the quantity of output produced is called _________________

Average Variable Costs

An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and business expenses of $150,000. He made a (an): a. implicit profit. b. economic loss. c. economic profit. d. accounting loss but not an economic loss. e. zero economic profit

B

Exhibit 2 Long-run average cost Given the short-run average total cost curves in Exhibit 2, what level of output per week minimizes average total cost? a. Q1 units. b. Q2 units. c. Q3 units. d. Q4 units.

B

Exhibit 2 Long-run average cost In Exhibit 2, economies of scale exist up to: a. Q1 units of output per week. b. Q2 units of output per week. c. Q3 units of output. d. Q4 units of output

B

A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is: a. 6,000 bushels per acre per year. b. 5,000 bushels per acre per year. c. 1,000 bushels per acre per year. d. 11,000 bushels per acre per year.

C

The___________ is the situation in which the marginal product of labor is greater than zero and declining as more labor is hired. a. law of demand. b. law of diminishing supply. c. law of diminishing returns. d. law of returns to scale

C

Which of the following is true at the point where diminishing returns set in? a. Both marginal product and marginal cost are at a maximum. b. Both marginal product and marginal cost are at a minimum. c. Marginal product is at a maximum and marginal cost at a minimum. d. Marginal product is at a minimum and marginal cost at a maximum

C

______________ Is a situation in which the long-run average cost curve does not change as the firm increases output.

Constant returns to Scale

Which of the following statements is false? a. TC = TFC + TVC. b. AVC = ATC - AFC. c. AFC = TFC/Q. d. MC equals the change in ATC divided by the change in Q. e. ATC = TC/Q.

D

Which of the following statements is true? a. The law of diminishing returns states that beyond some point the marginal product of a variable resource continues to rise. b. The marginal product is the change in total output by adding one additional unit of a fixed input. c. Fixed costs are costs which vary with the output level. d. When marginal productivity of a variable input is falling then marginal costs of production must be rising. e. When marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls

D

Any resource for which the quantity cannot change during the period of time under consideration is called _________

Fixed Input

A situation in which the long-run average cost curve rises as the firm increases output is called ________________

Diseconomies Scale

Which of the following statements is true? a. Economic profit equals accounting profit minus implicit costs. b. The short run is any period of time in which there is at least one fixed input. c. A fixed input is any resource for which the quantity cannot change during the period under consideration. d. In the long run there are no fixed costs. e. All of the answers above are correct

E

_________is equal to total revenue minus both explicit and implicit costs

Economic Profit

When long-run average cost decreases as output increases, the firm experiences ______

Economies of Scale

Payments to non-owners of a firm for their resources are called _______

Explicit Costs

A period of time so long that all inputs are variable is called a (an) _____________

Long Run

The _________ traces the lowest cost per unit at which a firm can produce any level of output when the firm can build any desired plant size

Long Run Average Cost Curve

______________ is the change in total cost associated with a change in one unit of output.

Marginal Costs

___________ is the change in total output produced by adding one unit of a variable input, with all other inputs used being held constant

Marginal Product

A (an) ___________ is the relationship between output and inputs

Production Function

The __________ is a time period during which a firm cannot alter some input such as its factory size

Short Run

The sum of total fixed cost and total variable cost at each level of output is called _____________

Total Costs

______________ includes costs, such as rent for office space, that cannot vary with the level of output.

Total Fixed Costs

_____________ such as wages, vary as the level of output varies

Total Variable Costs

Any resource for which the quantity can change during the period of time under consideration is called ___________

Variable Input

Exhibit 2 Long-run average cost In Exhibit 2, short-run average total cost, short-run marginal cost, and long-run average cost are all equal at which level of output per week? a. Q1 units. b. Q2 units. c. Q3 units. d. Q4 units.

B

If a firm enlarges its factory size and realizes higher average (per unit) costs of production then: a. it has experienced economies of scale. b. it has experienced diseconomies of scale. c. it has experienced constant returns to scale. d. the long-run average cost curve slopes downward. e. the long-run average cost curve shifts upward

B

Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the average variable cost curve, marginal cost must be: a. greater than average variable cost. b. less than average variable cost. c. equal to average variable cost. d. at its minimum

C

Exhibit 1 Cost schedule for Firm X As shown in Exhibit 1, the total cost of producing 3 units is: a. $100. b. $227. c. $208. d. zero

C

Exhibit 1 Cost schedule for Firm X As shown in Exhibit 1, the total cost of producing 5 units is a. $100. b. $227. c. $250. d. zero

C

The rule that states when marginal cost is below average cost, average cost falls. When marginal cost is above average cost, average cost rises. When marginal cost equals average cost, average cost is at its minimum point is called the ___________

Marginal-Average Rule

_______ is the minimum profit necessary to keep a firm in operation

Normal Profit