Meceach7

Front 1

Economists assume that the goal of a firm is to:

Back 1

xEconomists assume that the goal of a firm is to maximize total profit.

Front 2

x_____ costs represent a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment.

Back 2

xImplicit costs represent a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment the getover

Front 3

x Which of the following is an explicit cost?

Back 3

x Explicit costs are payments to non–owners of a firm for their resources.

Front 4

x Economic profit is defined as the difference between:

Back 4

x Economic profit is the difference between total revenue and all costs, both explicit and implicit.both

Front 5

xAccounting profit is total revenue minus total cost, including both explicit and implicit costs.

Back 5

xAccounting profit is the difference between a firm's total revenue and its explicit costs.onecost

Front 6

x Suppose that a small business takes in monthly revenue of $200,000. Labor, rental, energy, and other purchased input costs come to a total of $170,000. The owner⁄entrepreneur's monthly opportunity cost of her time invested in the business is $5,000 (this is what she could earn working elsewhere), and the owner⁄entrepreneur could get a return of $5,000 each month if she sold her business and invested the net proceeds in a financial asset such as a treasury bond. Which of the following correctly describes her monthly economic profit?

Back 6

xCorrect. Economic profit = total revenue – (explicit + implicit) costs = $200,000 – ($170,000 + $10,000) = $20,000.

Front 7

xNormal economic profit is zero. Zero economic profit means that all resources used by the firm earn their opportunity cost.

Back 7

x The accounting profit just sufficient to ensure to ensure that all resources used by the firm earn their opportunity cost is called a normal profit.

Front 8

xEconomists define the short run as a time period in which:

Back 8

x The short run is defined as a time period in which at least one input is fixed.

Front 9

xWhich of the following represents the key difference between the short run and the long run?

Back 9

xIn the short run at least one of the firm's resources is fixed, while in the long run all resources under the firm's control are variable

Front 10

xThe change in output due to one unit change in labor usage, the level of usage of other inputs remaining unchanged, is called:

Back 10

xThe change in output due to one unit change in labor usage, the level of usage of other inputs remaining unchanged, is called the marginal product of labor.

Front 11

x Which of the following best describes the law of diminishing marginal returns?urces:
a. the additions to output will eventually turn negative.
b. the additions to output will eventually decrease.
c. the additions to output cannot increase.
d. total output will eventually decrease.

Back 11

xccording to the law of diminishing marginal utility when more and more of a variable resource is added to a given amount of a fixed resource, the resulting change in output will eventually diminish and could become negative.additions to output will decrease

Front 12

xWhich of the following best describes a production function?

a. The relationship between the amount of resources employed and the total output produced by a firm.
b. The relationship between the quantity of labor employed and total cost.
c. The relationship between consumer preferences and market demand.
d. The relationship between price and quantity supplied by sellers in a market.

Back 12

xA production function describes the relationship between the amount of resources employed and the total output produced by a firm.

Front 13

x Which of the following best describes the law of diminishing marginal returns?

a. When more and more capital per labor is used in production, the marginal product of labor eventually declines and could become negative.
b. When more and more of a variable resource is added to a given amount of a fixed resource, the resulting change in output will eventually diminish and could become negative.
c. The notion that as a person consumes more and more of a good, such as 12 ounce cups of lemonade, the marginal utility from each additional cup will tend to decline.
d. The empirical fact that positive economic profits will tend to decline over time as new firms attracted by the extra–normal profit opportunity enter the market.

Back 13

xAccording to the law of diminishing marginal utility when more and more of a variable resource is added to a given amount of a fixed resource, the resulting change in output will eventually diminish and could become negative.

Front 14

xIdentify the correct statement.Identify the correct statement.
a. When there are negative marginal returns, the total product curve is rising.
b. When there are negative marginal returns, the total product curve is declining, but not necessarily negative.
c. When there are diminishing but positive returns the total product curve is falling.
d. When there are diminishing but positive returns the total product curve is rising, at an increasing rate.

Back 14

xIf there are diminishing but positive returns the total product curve is still rising, but at a decreasing rate. When there are negative marginal returns, the total product curve is declining, but not necessarily negative. not b

Front 15

xOnce decreasing marginal returns set in, _____ declines.

Back 15

xOnce decreasing marginal returns set in, marginal product declines.

ebook : T

Front 16

xSuppose total cost is $1,000 when output is zero, $1,200 when output is one, and $1,500 when output is two, then which of the following is true?

Back 16

xThe marginal cost of producing the second unit of output is ($1,500 – $1,200)⁄1 = $300.

Front 17

xIncreasing marginal cost is associated with:

a. increasing total product.
b. decreasing marginal product.
c. increasing marginal product.
d. decreasing average product

Back 17

xIncreasing marginal cost is associated with decreasing marginal product.

Front 18

xWhich of the following best describes marginal cost?
a. Change in total cost resulting from a one–unit change in output
b. Variable cost divided by the quantity of output produced
c. The sum of fixed cost and variable cost
d. Total cost divided by the quantity of output produced

Back 18

x Marginal cost is the change in total cost resulting from a one–unit change in output.

Front 19

xWhen a firm experiences increasing marginal returns, the marginal cost of output also increases. Similarly, when the firm experiences decreasing marginal returns, the marginal cost of output also decreases.
a. True
b. False

Back 19

falsex When a firm experiences increasing marginal returns, the marginal cost of output decreases, while when the firm experiences decreasing marginal returns, the marginal cost of output increases.

Front 20

xotal cost divided by total output yields:

Back 20

xIt yields average total cost. taught in class last

Front 21

xThe rising marginal cost curve intersects the minimum point of both the average variable cost and average total cost curves.
a. True
b. False

Back 21

truex Marginal cost falls faster than average variable and average total cost, and as long as marginal cost remains less than average variable and average total cost, these average curves must continue to decline. Marginal cost also rises faster than average variable and average total cost, and once marginal cost rises above average variable and average total cost, these average curves must begin to rise. Thus they intersect at the minimum point on the average curves.

Front 22

xIf average variable cost is falling, we know that:
a. marginal cost is rising.
b. marginal cost is falling.
c. marginal cost is less than average variable cost.
d. marginal cost is greater than average variable cost

Back 22

xIf average variable cost is falling, we know that marginal cost is less than average variable cost.
a is awrong answer

Front 23

x_____ are forces that cause a reduction in a firm's average cost as the scale operation increases in the long run. _____ are forces that cause a firm's average cost to increase as the scale of operation increases in the long run

Back 23

xEconomies of scale are forces that cause a reduction in a firm's average cost as the scale operation increases in the long run. Diseconomies of scale are forces that cause a firm's average cost to increase as the scale of operation increases in the long run.

Front 24

xWhich of the following is a way in which firms can achieve economies of scale?
a. Using more workers than are actually needed
b. Producing different products in the same plant
c. Increasing the scale of operation
d. Product differentiation

Back 24

xProducing different products in the same plant will lead to higher long–run average costs. A larger scale of production allows firms to use larger more efficient machines and to assign workers to more specialized tasks.

Front 25

xWhich of the following statements is true?
a. The long–run average cost curve connects the minimum points on marginal cost curves for different plant sizes.
b. In the long run, the firm is committed to a particular plant size, and thus cannot vary any input.
c. In the long run, for any output level a firm can select a plant size that will allow it to minimize average total cost.
d. In the long run, the firm is committed to a particular plant size, and can only vary such resources as labor and some material inputs

Back 25

xThe long–run average cost curve is also called the planning curve since it allows firms to plan for a particular plant size to match an anticipated output level. In the long run the firm can vary plant size and other resources used in production.In the long run, for any output level a firm can select a plant size that will allow it to minimize average total cost.

Front 26

xThe cost curve that shows the lowest per unit cost of producing any given level of output is called:
a. the average fixed cost curve.
b. the average variable cost curve.
c. the long run average cost curve.
d. the long run marginal cost curve

Back 26

The cost curve that shows the lowest per unit cost of producing any given level of output is called the long run average cost curve.is the cheapest to the company

Front 27

xIf long–run average cost increases as firm size increases, then the firm is experiencing:
a. diseconomies of scale.
b. increasing marginal returns.
c. diminishing marginal returns.
d. economies of scale.

Back 27

xf long–run average cost increases as firm size increases, then the firm is experiencing diseconomies of scale.