question

All decisions can be placed in these two time frames

answer

Short run and long run

question

The _______ ______ is a time frame in which the quantity of one or more resources used in production is fixed. Decisions made in this time period are easily reversible.

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Short run

question

For most firms, the capital, called the firm's plant, is ____ in the short run.

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Fixed

question

Labor can be changed in the short run. True or False.

answer

True

question

This is a time frame in which the quantities of all resources—including the plant size—can be varied. Decisons made in this time frame are not easily reversible.

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Long run

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A _____ _______ is a cost incurred by the firm and cannot be changed.

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Sunk cost

question

True or False: If a firm's plant has no resale value, the amount paid for it is a sunk cost.

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True

question

Sunk costs are relevant to a firm's current decisions. True or False

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False

question

To increase output in the SHORT RUN, a firm must increase the amount of _______ employed.

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Labor

question

The _________ _________ ___ ___________ is equal to total product divided by the quantity of labor employed.

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Average product of labor

question

As the quantity of labor employed increases: Total product increases. Marginal product increases initially ...but eventually decreases. Average product decreases after initally increasing as well.

answer

Short run technology constraint

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_______ ________ show how the firm's total product, marginal product, and average product change as the firm varies the quantity of labor employed.

answer

Product curves

question

The ______ ________ curve is similar to the PPF. It separates attainable output levels from unattainable output levels in the short run.

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Total product

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In the short run, there is __________ marginal returns initially ________ marginal returns eventually as labor increases.

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Increasing; diminishing

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Increasing marginal returns arise from increased ______ ____ _________ __ ______.

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Specialization and division of labor.

question

This arises because each additional worker has less access to capital and less space in which to work.

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Diminishing marginal returns

question

As a firm uses more of a variable input with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes.

answer

Law of diminishing returns

question

When the marginal product curve ______ the average product curve, the average product curve slopes upward.

answer

Exceeds

question

When the marginal product curve is _________ the average product curve, the average product curve slopes downward.

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Below

question

When the marginal product curve _______ the average product curve, average product curve is at its maximum.

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Intersects

question

To produce more output in the short run, the firm must employ more labor, which means that it must increase its ______.

answer

Costs

question

The cost of the firm's fixed inputs. Does not change with output.

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Total fixed cost (TFC)

question

A firm's ________ ___________ is the cost of all resources used

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Total cost (TC)

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The cost of the firm's variable inputs. Variable costs do change with output.

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Total variable cost (TVC)

question

Total cost ______ total fixed cost plus total variable cost. = TFC + TVC

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TC

question

True or False: Total fixed cost is the same at each output level.

answer

True

question

Total variable cost _____ as output _______.

answer

Increases; increases

question

True or False: Total cost, which is the sum of TFC and TVC also increases as output increases.

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True

question

The Total Variable Cost curve and the Total Product curve are the same shape except that Total Product measures _______ per output on the x axis while Total Variable measures ______ per output on the x axis.

answer

Labor; cost

question

Over the output range with increasing marginal returns, marginal cost ______ as output increases.

answer

Falls

question

Over the output range with diminishing marginal returns, marginal cost ________as output increases.

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Rises

question

Total fixed cost per unit of output.

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Average fixed cost (AFC)

question

Total variable cost per unit of output.

answer

Average variable cost (AVC)

question

Total cost per unit of output.

answer

Average total cost (ATC)

question

= AFC + AVC.

answer

ATC

question

The AFC curve shows that average fixed cost falls as output _______.

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Increases

question

The AVC curve is U-shaped. As output _________ , average variable cost falls to a minimum and then increases.

answer

Increases

question

When the marginal cost curve is below the average cost curve, the average cost curve slopes ______.

answer

Downward

question

When the marginal cost curve is above the average cost curve, the average cost curve slopes ________.

answer

Upward

question

The point at which the marginal cost curve and the average cost curve intersect is the _____ of the average cost curve.

answer

Minimum

question

When the marginal cost curve is below the average total cost curve, the average total cost curve slopes ______.

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Downward

question

When the marginal cost curve is above the average total cost curve, the average total cost curve slopes ________.

answer

Upward

question

The AVC and ATC curves are U-shaped because: Initially, MP _____ AP, which brings ____ AP and ______ AVC and ATC. Eventually, MP falls ____ AP, which brings _____ AP and ____ AVC and ATC.

answer

Exceeds; rising; falling; below;decreasing;increasing

question

MC is at its _________ at the same output level at which MP is at its _________.

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Minimum;maximum

question

When MP is ____ , MC is _______.

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Rising;falling

question

AVC is at its _________at the same output level at which AP is at its _____.

answer

Minimum;maximum

question

When AP is ______ , AVC is ______.

answer

Rising;falling

question

An increase in _________ shifts the product curves upward and the cost curves downward.

answer

Producticity

question

If a technological advance results in the firm using more capital and less labor, ______ costs increase and ________ costs decrease.

answer

Fixed; variable

question

Average total cost increases at ______ output levels and _____ at high output levels.

answer

Low;high

question

An increase in a ______ cost shifts the total cost (TC ) and average total cost (ATC ) curves upward but does not shift the marginal cost (MC ) curve.

answer

Fixed

question

An increase in a _______ cost shifts the total cost (TC ), average total cost (ATC ), and marginal cost (MC ) curves upward.

answer

Variable

Chapter 11 Parkin Microeconomics 10th Edition (Short Run) – Flashcards

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