question

Average total cost equals total cost _______ by output.

answer

divided

question

What is the definition of economies of scale?

answer

Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

question

When cost curves shift, it is die to changes in which of the following?

answer

b) Technology c) Resource prices

question

In time, the growth of a firm's plant size and output may lead to ________ and ________.

answer

higher average total costs; diseconomies of scale

question

________ cost is the sum of fixed cost and variable cost at each level of output.

answer

total

question

Which is the definition of explicit costs?

answer

b) A firm's monetary payments made for the use of resources owned by others. d) A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.

question

An ___________ cost is the value or worth the resource would have in its best alternative use.

answer

opportunity

question

Which of the following are examples of an opportunity cost?

answer

b) The opportunity cost of the paper used in printing textbooks is the value it would have in printing encyclopedias or romance novels. c) The opportunity cost of steel used in constructing office buildings is the value it would have in manufacturing automobiles or refrigerators.

question

What is the best definition of constant returns to scale?

answer

d) The unchanging average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

question

A firm's decision about what output level to produce at is based on ________ decisions.

answer

a) marginal

question

________ costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

implicit

question

________ costs equals the change or difference in total cost divided by the change or difference in output.

answer

marginal

question

Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)?

answer

a) Interest on a firm's debts b) Rental payments c) Insurance premiums

question

Total costs, including _______ (one word) and marginal costs change with the level of output.

answer

variable

question

Which of the following resources can a firm easily and quickly adjust?

answer

c) Raw materials d) Fuel e) Hourly labor

question

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production, a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the law of

answer

a) diminishing marginal returns

question

The _________ of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

answer

economic cost

question

What methods can be used to calculate average total cost?

answer

a) Total fixed cost divided by output (Q) plus total variable cost divided by output (Q) b) Total cost divided by output (Q) c) Average fixed cost plus average variable cost

question

What type of costs in total do not vary with changes in output?

answer

b)Fixed

question

What is the definition of explicit costs?

answer

a) A firm's monetary payments made for the use of resources owned by others. c) A firm's monetary payments for those who supply labor services, materials, fuel, and transportation services.

question

Economic costs are defined as

answer

a) the value or worth a resource would have in its best alternative use.

question

The formula for marginal costs is

answer

b) the change or difference in total variable cost divided by the change or difference in output c) the change or difference in total cost divided by the change or difference in output

question

____________ costs are the monetary payments a firm makes to those who provide the factors or inputs to production.

answer

Explicit

question

When a firm chooses to produce the appropriate level of output, it has made:

answer

b) a decision in the margin

question

If a firm's total revenue is equal to its implicit and explicit costs, then the firm is said to earn a(n)

answer

a) normal profit b) accounting profit d) zero economic profit

question

A firm's costs of producing a specific output depend on which of the following?

answer

a) The prices of the needed resources required to produce a given output. d) The quantities of resources required to produce a given output.

question

Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

answer

a) Amount of machinery c) Size of the factory

question

Average product of labor is also referred to as labor _________.

answer

productivity

question

What is another term for economies of scale?

answer

Economies of mass production

question

Which of the following are examples of implicit costs?

answer

b) Foregone wages c) Foregone rent

question

Average ________ cost always declines as output increases.

answer

fixed

question

Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

answer

b) The long run

question

_________ costs are payments made by firms to attract the resources they need away from alternate production opportunities.

answer

a) Economic e) Opportunity

question

From an existing firm's perspective, the ________ ________ is a time period during which it can adjust the quantities of all the inputs that it employs, including plant capacity.

answer

long run

question

What is the total revenue if economic profit is $24,000 and economic costs are $96,000?

answer

$120,000

question

Which of the following are ways that industries and firms can change the amounts of inputs used in the long-run?

answer

a) An industry can change its overall capacity. c) A firm can build a larger plant. d) An industry can make major complex technological production advances.

question

When marginal product at its maximum, marginal costs:

answer

a) begin rising with additional output produced. c) are at a minimum at the same output level

question

The long run average total cost curve is made up of:

answer

d) all points of tangency of the short run average total cost curves

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

c) $26

question

What is the effect of an increase in the price of labor on the ATC, AVC, AFC, and MC curves?

answer

a) The average variable cost, average total cost, and marginal cost curves shift upward. c) The average fixed cost curve remains the same.

question

Total variable costs _______ with increases in output

answer

rise

question

What is average fixed cost if average total cost is $100 and average variable cost is $75?

answer

$25

question

What type of costs do firms incur when producing products?

answer

a) Implicit d) Explicit

question

Labor _______ allows workers to become even more proficient in their tasks as they work at fewer tasks.

answer

specialization

question

Which of the following is an example of labor specialization?

answer

b) Each worker may now have just one task instead of five or six. d) Workers can work full-time on the tasks for which they have unique skills. e) Hiring more workers means jobs can be divided and subdivided.

question

What is the definition of efficient capital?

answer

c) The purchase and effective use of efficient capital equipment to achieve large scale production economies of scale

question

The size of the factory, the amount of machinery and equipment, and other capital resources make up __________ __________.

answer

plant capacity

question

Marginal cost designates the cost that:

answer

a) can be incurred by producing an additional unit c) can be saved by not producing the last unit

question

As a firm grows, decision making may slow, impairing efficiency and _______ average total cost.

answer

raising

question

Which of the following is not covered when an entrepreneur's economic profit is zero?

answer

b) Pure profit

question

When a firm considers its economic costs, it considers

answer

a) all opportunity costs of resources used d) explicit and implicit costs

question

The shape of a long-run average total cost curve will determine:

answer

c) the number and size of firms in the industry

question

If you quit your job to start your own business, your forgone wages are:

answer

a) an opportunity cost c) an implicit cost

question

A natural monopoly is a relatively rare market situation where average total cost is

answer

b) minimized when only one firm produces the particular good.

question

Which group of costs is the most accurate example of variable cost?

answer

b) Payments for materials, fuel, power, and transportation services

question

Increased fixed costs shift the average fixed cost and the average total cost curves _________.

answer

upward

question

When a firm's total revenue exceeds all its economic costs

answer

a) the residual goes to the entrepreneur d) the residual is called economic or pure profit

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

b) $10

question

An _________ profit is equal to total revenue less explicit costs.

answer

accounting

question

Greater ________ specialization eliminates the loss of time that occurs whenever a worker shifts from one task to another.

answer

b) resource

question

Heavy industries, such as aluminum and steel, exhibit the pattern of _______ long-run average total costs.

answer

declining

question

A firm can most easily increase its output in the short run by

answer

c) adding units of labor to its fixed plant.

question

What is one reason for economies of scale?

answer

c) Labor specialization

question

Average total costs are pulled upward when _________ rises above average total costs.

answer

d) marginal cost

question

A firm's _________ costs are the explicit and implicit costs of the resources it has used.

answer

economic

question

Total variable cost reflects the law of _________ _________ as more and more variable resources are added.

answer

diminishing returns

question

An industry and the firms in that industry can adjust all resource ________ in the long run.

answer

inputs

question

__________ product of labor is total product divided by units of labor.

answer

Average

question

What is the definition of accounting profit?

answer

Accounting profit is what remains after a firm has paid its explicit costs.

question

The average variable cost curve is

answer

u-shaped

question

The long run exists when all inputs costs are _________.

answer

variable

question

__________ costs are part of the simple existence of a firm's plant and must be paid even when output is zero.

answer

fixed

question

_________ product is the change in total product divided by the change in labor input.

answer

Marginal

question

High-volume production and being a large-scale producer are economic justifications for:

answer

c) the purchase of efficient capital

question

Average total cost ________ when economies of scale exist and a firm is expanding production.

answer

declines

question

A firm can directly and immediately control its marginal costs by its controlling its ________ costs.

answer

variable

question

Total _________ costs equal explicit costs plus implicit costs.

answer

economic

question

________ product is zero when total product is at a maximum.

answer

marginal

question

A firm cannot avoid paying fixed costs in the _______ run.

answer

short

question

What is the definition of economic profit?

answer

c) Total revenue less economic costs (explicit and implicit)

Economics Chapter 9 Practice – Flashcards

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