Chapter 13 (The Cost of Production) – Flashcards
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The marginal product of labor can be defined as the change in
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output divided by the change in labor.
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Industrial organization is the study of how
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firms' decisions regarding prices and quantities depend on the market conditions they face.
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The marginal product of any input is the
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increase in total output obtained from one additional unit of that input.
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A production function describes
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how a firm turns inputs into output.
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The difference between accounting profit and economic profit relates to
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the manner in which costs are defined.
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Total cost can be divided into two types of costs:
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fixed costs and variable costs.
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Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?
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industrial organization
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Economies of scale occur when
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long-run average total costs fall as output increases.
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Constant returns to scale occur when a firm's
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long-run average total costs do not vary as output increases.
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The cost of producing the typical unit of output is the firm's
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average total cost.
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Some costs do not vary with the quantity of output produced. Those costs are called
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fixed costs.
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Economists in the field of industrial organization study how
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firms' decisions about prices and quantities depend on market conditions.
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Economic profit is equal to total revenue minus the
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opportunity cost of producing goods and services.
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Accounting profit is equal to
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total revenue minus the explicit cost of producing goods and services.
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Profit is defined as
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total revenue minus total cost.
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A firm's opportunity costs of production are equal to its
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explicit costs + implicit costs.
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Total revenue minus only explicit costs is called
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accounting profit.
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Diseconomies of scale occur when
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long-run average total costs rise as output increases.
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Marginal cost is equal to
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Change Total Cost DIVIDED by Change in Quantity
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Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"
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marginal cost
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When calculating a firm's profit, an economist will subtract only
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the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
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For a firm, the relationship between the quantity of inputs and quantity of output is called the
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production function.
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The firm's efficient scale is the quantity of output that minimizes
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average total cost.
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The efficient scale of the firm is the quantity of output that
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minimizes average total cost.
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A total-cost curve shows the relationship between the
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quantity of output produced and the total cost of production.
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Variable cost divided by quantity produced is
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a. average variable cost. b. marginal cost. c. average total cost. None of the above is correct.
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When a firm experiences constant returns to scale,
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long-run average total cost is unchanged, even when output increases.
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The difference between accounting profit and economic profit is
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implicit costs.
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Average total cost equals
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(fixed costs + variable costs) divided by quantity produced.
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The amount by which total cost rises when the firm produces one additional unit of output is called
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marginal cost.
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Marginal cost equals
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(i) change in total cost divided by change in quantity produced. (ii) change in variable cost divided by change in quantity produced.
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When the marginal product of an input declines as the quantity of that input increases, the production function exhibits
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diminishing marginal product.
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Economists normally assume that the goal of a firm is to
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maximize its profit.
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The amount of money that a firm receives from the sale of its output is called
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total revenue.
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Average total cost (ATC) is calculated as follows:
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ATC = (total cost)/(quantity of output).
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Constant returns to scale occur when the firm's long-run
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average total costs are constant as output increases.
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To an economist, the field of industrial organization answers which of the following questions?
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How does the number of firms affect prices and the efficiency of market outcomes?
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Which of the following is not a property of a firm's cost curves?
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Average total cost will cross marginal cost at the minimum of marginal cost.
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Total revenue minus both explicit and implicit costs is called
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economic profit.
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Which of these assumptions is often realistic for a firm in the short run?
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The firm can vary the number of workers it employs but not the size of its factory.
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The things that must be forgone to acquire a good are called
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opportunity costs.
