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28 Cards in this Set
- Front
- Back
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1. Our definition of the short run is the time during which _____________________ is fixed,
but _______________________ is variable. |
1. capital; labor
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2. In the long run (no, all) factors are variable.
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2. all
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3. Fixed costs (do, do not) vary with output; variable costs (do, do not) vary with output.
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3. do not; do
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4. (Rent, wages) and (mortgage interest payments, raw materials costs) are examples of fixed costs;
(rent, wages) and (mortgage interest payments, raw materials costs) are examples of variable costs. |
4. rent; mortgage interest payments;
wages; raw material costs |
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5. Short-run average cost curves eventually are upward sloping due to ______________.
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5. diminishing marginal product
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6. If marginal cost exceeds average total cost, then average total cost will (fall, rise, remain constant).
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6. rise
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7. At the minimum of the average total cost curve, marginal cost is (less than, greater than, equal to)
average total cost. |
7. equal to
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8. If marginal cost is less than average total cost, then average total cost will (fall, rise, remain constant).
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8. fall
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9. Because of the law of diminishing marginal product, in the (short, long) run the marginal product of
labor will eventually (fall, rise, remain constant). |
9. short; fall
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10. The long-run cost curve typically is U-shaped, because initially as a firm expands its scale of
operations, it realizes _____________________ of scale; then it may realize __________ returns to scale; eventually it realizes _________________ of scale. |
10. economies; constant; diseconomies
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11. Reasons for economies of scale include ____________________, ___________________,
and ____________________. |
11. specialization; dimensional factors;
improved productive equipment |
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12. A firm might experience diseconomies of scale due to ________________ and ________________.
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12. disproportionate requirements for
managers and staff; disproportionate costs of information and communication |
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T F 1. Short-run cost curves that include variable costs eventually reflect the influence of the law
of diminishing marginal product. |
1. T
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T F 2. Fixed costs vary with output.
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2. F By definition they do not.
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T F 3. Eventually, as output expands, the short-run marginal cost curve must rise.
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3. T
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T F 4. When average total cost exceeds marginal cost, marginal cost must be rising.
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4. F Not necessarily.
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T F 5. When average variable cost is less than marginal cost, marginal cost must be falling.
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5. F When AVC is less than MC, the MC curve has already crossed through the minimum point
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T F 6. At the minimum average total cost output level, marginal cost equals average total cost.
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6. T
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T F 7. In the short run, the supply of labor to the firm is usually fixed.
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7. F Capital is fixed in the short run.
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T F 8. Because of the law of diminishing marginal product, the marginal product of labor will rise.
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8. F It falls due to the law of diminishing marginal product.
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T F 9. Long-run cost curves are U-shaped due to the law of diminishing marginal product.
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9. F Diminishing marginal product occurs in the short run.
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T F 10. The minimum efficient scale is the lowest scale of output at which long-run average total cost
is as low as possible. |
10. T
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TC = TFC + __________
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TVC
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AFC = __________ - AVC
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ATC
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ATC = (TVC/Q) + __________
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AFC
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TFC = Q × __________
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AFC
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AVC = (TC/Q) - __________/Q
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TFC
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TVC = (Q × ATC) - Q × __________
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AFC
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