microeconomics 7

question

Economies of scale may arise from all but one of the following. Which one is it?
answer

government economic subsidies protect firms from competition to avoid losses
question

Fixed costs are important because, at least in the ___________, the firm _______________.
answer

short run; cannot alter them
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Whatever the firm’s quantity of production, _____________ must exceed total costs if it is to earn a profit.
answer

total revenue
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In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.
answer

diseconomies of scale
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In microeconomics, the term _____________________ is synonymous with economies of scale.
answer

increasing returns to scale
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___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.
answer

Total costs
question

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?
answer

physical space for the gallery
question

If the firm produces 5 units (quantity) that it sells at a price of $20.00 each, what will its profits or losses equal?
answer

losses equal $55
question

______________ include all of the costs of production that increase with the quantity produced.
answer

Variable costs
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The economies-of-scale curve is a long-run average cost curve, because
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it allows all factors of production to change.
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In order to determine the average variable cost, the firm’s variable costs are divided by _______________________.
answer

the quantity of output
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If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?
answer

variable costs
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________________________ arises where many firms are competing in a market to sell similar but differentiated products.
answer

Monopolistic competition
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In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.
answer

either total cost or variable cost
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Which of the following should typically be ignored because spending has already been made and cannot be changed?
answer

sunk costs
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In economics, a firm that faces no competitors is referred to as _________________.
answer

a monopoly
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The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.
answer

average variable cost; fixed costs
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According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will
answer

do so regardless of what type of competition exists in a market.
question

In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm’s to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.
answer

acquire energy efficient production technologies
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A firm’s ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.
answer

fixed costs; do not change,
question

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?
answer

divide total costs into two categories: fixed costs that can’t be changed in the short run and variable costs that can be
question

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.
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total revenue
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The ______________ of all firms can be broken down into some common underlying patterns.
answer

cost structure
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I’MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I’MABIGCorp.’s average fixed cost to produce the 7,000 can openers was
answer

$2.43
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In order to determine ____________, the firm’s total costs must be divided by the quantity of its output.
answer

average cost
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____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
answer

Diminishing marginal returns
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Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?
answer

costs of research and development
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If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.
answer

decreasing returns to scale
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The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
answer

economies of scale
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Why would labor be treated as a variable cost?
answer

producing larger quantities of a good or service generally requires more workers
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A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.
answer

constant returns to scale
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Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs?
answer

costs incurred in the act of producing
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The term _____________ is used to describe the additional cost of producing one more unit.
answer

marginal cost

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