Quiz 7

The law of diminishing returns explains why short-run marginal cost curves are upsloping. True/False

True

Variable costs are costs that change directly with output. True/False

True

When the total product is at its maximum level, the marginal product is zero. True/False

True

When a firm does more of something, it gets better at it. This learning-by-doing is A. a source of diseconomies of scale. B. a source of economies of scale. C. called the principle of natural progression. D. called "spreading the overhead."

a source of economies of scale.

To the economist, total cost includes A. explicit and implicit costs B. neither implicit nor explicit costs C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.

a. explicit and implicit costs

Fixed cost is A. the cost of producing one more unit of capital, for example, machinery. B. any cost that does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.

any cost that does not change when the firm changes its output.

Marginal cost can be defined as the A. change in total fixed cost resulting from one more unit of production. B. change in total cost resulting from one more unit of production. C. change in average total cost resulting from one more unit of production. D. change in average variable cost resulting from one more unit of production.

change in total cost resulting from one more unit of production.

Which of the following is a short-run adjustment? A. A local bakery hires two additional bakers. B. Six new firms enter the plastics industry. C. The number of farms in the United States declines by 5 percent. D. BMW constructs a new assembly plant in South Carolina.

A local bakery hires two additional bakers.

A firm's economic profit is usually higher than its accounting profit. True/False

False

Marginal product is A. the change in total output attributable to the employment of one more worker. B. the change in total revenue attributable to the employment of one more worker. C. the change in total cost attributable to the employment of one more worker. D. total product divided by the number of workers employed.

the change in total output attributable to the employment of one more worker.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes A. economies and diseconomies of scale. B. X-inefficiency. C. the law of diminishing returns. D. the law of diminishing marginal utility.

the law of diminishing returns.

Economies and diseconomies of scale explain A. the profit-maximizing level of production. B. why the firm's long-run average total cost curve is U-shaped. C. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. D. the distinction between fixed and variable costs.

why the firm's long-run average total cost curve is U-shaped.

To economists, the main difference between the short run and the long run is that. A. the law of diminishing returns applies in the long run, but not in the short run. B. in the long run all resources are variable, while in the short run at least one resource is fixed. C. fixed costs are more important to decision making in the long run than they are in the short run. D. in the short run all resources are fixed, while in the long run all resources are variable.

B. In the long run all resources are variable, while in the short run at least one resource is fixed.

If a firm decides to produce no output in the short run, its costs will be A. its marginal costs. B. its variable costs. C. its fixed costs. D. zero.

its fixed costs.

The total product curve graphically shows how much A. profit the firm will earn at various levels of production. B. output the firm will produce at various prices of its product. C. the costs of production will be as the firm changes its total production level. D. output the firm can produce with various quantities of its variable input.

output the firm can produce with various quantities of its variable input.