chapter 5 – Flashcard
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In Table 5.5, the total cost of 2 units is: $12. $10. $3. $22.
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22
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Which of the following must be considered in long run planning? Production choices. Investment choices. Fixed costs. Declining marginal physical product.
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Investment choices.
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In defining costs, economists recognize: Explicit and implicit costs while accountants recognize only implicit costs. Only explicit costs while accountants recognize explicit and implicit costs. Explicit and implicit costs while accountants recognize only explicit costs. Only explicit costs while accountants recognize only implicit costs.
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Explicit and implicit costs while accountants recognize only explicit costs.
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The sum of fixed cost and variable cost at any rate of output is equal to: Total cost. Marginal cost. Total profit. Average total cost.
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Total cost.
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The law of diminishing returns can explain why: Marginal cost eventually increases in the short run as more output is produced. Marginal cost decreases as more output is produced. The average fixed-cost curve declines as long as output increases. The demand curve is typically downward sloping.
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Marginal cost eventually increases in the short run as more output is produced.
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A firm can be identified as profitable if the: Difference between its total revenue and total costs is positive. Sum of total revenue and total costs is high. Difference between its total revenue and total costs is negative. Total costs and marginal costs are low.
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Difference between its total revenue and total costs is positive.
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If the firm in Table 5.2 can sell jeans for $7.00 per pair, the total profit from producing 40 pair is: $280. $10. $290. $-10.
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-10
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Which of the following government policies is least likely to increase productivity? Subsidies for schools Student loans Tax incentives for firms that invest in capital Transfer payments to unemployed workers
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Transfer payments to unemployed workers
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Based on the law of diminishing returns, if the number of workers increases and capital investments do not keep pace then, ceteris paribus: The production function will definitely shift upward. Marginal physical product of labor will decrease. The average total cost curve will definitely decrease. Marginal physical product of labor will increase.
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Marginal physical product of labor will decrease.
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Costs of production that change with the rate of output are: Sunk costs. Fixed costs. Opportunity costs. Variable costs.
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Variable costs.
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What is the marginal cost of the 30th pair of jeans in Table 5.2? $1.50 $4.50 $45.00 $6.00
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4.50
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An investment in human and nonhuman capital will result in: An increase in marginal costs. A decrease in production possibilities. A decrease in the production function. An increase in the marginal physical product of labor.
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An increase in the marginal physical product of labor.
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If the firm in Table 5.2 receives $7.00 for each pair of jeans, in the short run it should: Produce 30 pairs of jeans. Produce 20 pairs of jeans. Produce 40 pairs of jeans. Only produce jeans if the price is greater than average total cost.
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Produce 30 pairs of jeans
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When a firm makes an investment decision, it views all inputs as: Fixed over the short run. Variable over the short run. Variable over the long run. Fixed over the long run.
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Variable over the long run.
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How intensively to use existing plant and equipment is a long-run investment decision. True False
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false
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In Table 5.5, the total variable cost of the first unit is: $29. $9. $19. $10.
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9
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If a firm increases output, total costs will rise because of a change in: Absolute costs. Fixed costs. Variable costs. Regular costs.
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Variable costs
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Economic and accounting costs differ by the amount of explicit costs. True False
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false
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The production function indicates how much output producers will actually produce. True False
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False
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Which of the following is equivalent to total cost? Fixed costs plus variable costs. Economic costs plus accounting costs. Marginal costs plus implicit costs. Variable costs plus marginal costs.
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Fixed costs plus variable costs.
