Topic 8: Production
Suppose a snowboard manufacture increases its output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $100 to $110. The marginal cost of producing an extra snowboard is $___.
$10
Which of the following is true of economic costs?
Economic costs are defined as the sum of explicit and implicit costs.
Business operating decisions should be based on _____ profit.
economic
Increasing marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is _____ than that of the previous variable resource.
greater
Which of the following is a way that firms can avoid paying fixed costs in the short run?
Firms cannot avoid fixed costs in the short run.
Which of the following is true of the shape of the marginal cost curve?
It is U-shaped.
_____ cost equals total fixed cost plus total variable cost.
Total
Total revenue minus the explicit cost of production is _____ profit.
accounting
The fixed cost per unit is equal to:
average fixed cost.
The vertical distance between the average variable cost and the average total cost curves is equal to the
average fixed cost. AFC = ATC - AVC
Total cost per unit is equal to:
average total cost. ATC = TC/Q or AFC + AVC
Total variable cost divided by the amount of output produced is equal to:
average variable cost. AVC = TVC/Q
Variable cost per unit of output produced is:
average variable cost. AVC = TVC/Q
Positive _____ profits encourage more firms to enter the market to produce goods and services.
economic
Total revenue minus the explicit and implicit cost of production is _____ profit.
economic
Monetary payments made by individuals, firms, and governments for the use of others' land, labor, capital, and entrepreneurial ability are _____ costs.
explicit
Total revenue minus the total _____ cost of production is accounting profit
explicit
The marginal cost is the:
extra or additional cost associated with the production of an additional unit of output.
Costs for which no monetary payment is explicitly made are _____ costs.
implicit
Decreasing _____ returns are 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.
marginal
The additional output produced as a result of utilizing one more unit of a variable resource is called
marginal product
The _____ costs of using owned resources are implicit costs.
opportunity
Total _____ equals price times quantity.
revenue
A period of time in which at least one input of production is fixed is known as the _____ run.
short
Costs that change with the amount of output produced are _____ costs.
variable
Costs that increase as production increases and decrease as production decreases are _____ costs.
variable
The marginal cost curve must intersect both the average _____ cost and average _____ cost curves at their respective minimum points.
variable; total
The total amount of output produced with a give amount of resources is known as
total product
Costs that do not change with the amount of output produced are _____ costs.
fixed
