EC 202 MSU Unit 2 Topic 10

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Posted on

March 14th, 2023

question

Three properties that are most important to remember:

answer

1) Marginal cost eventually rises with the quantity of output.
2) The average-total-cost curve is U-shaped.
3) The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost.

question

Costs of Production

answer

if you know the technology of production, and if you know the prices of the inputs to production, then you can find the firm's costs at any level of output

question

Total Costs=

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Fixed Costs + Variable Costs

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Average Costs

answer

cost per unit of output. Total cost divided by output (TC/Q)

question

Average cost curve

answer

the curve that shows average cost as a function of output. Output is the independent variable and average cost is the dependent variable

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Average Fixed Cost=

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Total Fixed Cost/ Output

AFC= TFC/Q

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Average Fixed Cost always ________ as output increases

answer

declines

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Average Variable Cost

answer

total variable cost/output

AVC= VC/Q

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Average Total Cost

answer

equals Total Cost divided by Output

ATC= TC/Q

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TC =

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FC + VC

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ATC =

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AFC+ AVC

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Marginal Cost

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the change in total cost per unit change in output, the slope of the total cost curve

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Marginal Cost curve

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the curve that shows marginal cost as a function of output

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AC curve is always __ -shaped

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U-shaped

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MC eventually ______

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rises, due to the Law of Diminishing Returns.

question

Shapes on Cost Curves

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1) When MC < AC, AC is falling
2) When MC > AC, AC is rising
3) When MC = AC, AC = MC

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MC rises when ____ falls, as more is produced

answer

MP (Marginal Product)

question

Costs in the Long-run

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All inputs are variable, long run is a series of short run opportunities

question

Economies of Scale

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Declining Long-run curve

question

Diseconomies of Scale

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Rising Long-run curve

question

Reasons for Economies of Scale

answer

specialization and division of labor

question

Reasons for Diseconomies

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Coordination, organization, and communication is inefficient

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The firm's efficient scale is the quantity of output that minimizes

answer

Average Total Cost

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One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

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the size of a factory is fixed

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When comparing short-run average total cost with long-run average total cost at a given level of output,

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short-run average total cost is typically above long-run average total cost.

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The most likely explanation for economies of scale is

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specialization of labor

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Firms may experience diseconomies of scale when

answer

large management structures are bureaucratic and inefficient

1 of 27

question

Three properties that are most important to remember:

answer

question

Costs of Production

answer

if you know the technology of production, and if you know the prices of the inputs to production, then you can find the firm's costs at any level of output

question

Total Costs=

answer

Fixed Costs + Variable Costs

question

Average Costs

answer

cost per unit of output. Total cost divided by output (TC/Q)

question

Average cost curve

answer

the curve that shows average cost as a function of output. Output is the independent variable and average cost is the dependent variable

question

Average Fixed Cost=

answer

Total Fixed Cost/ Output

AFC= TFC/Q

question

Average Fixed Cost always ________ as output increases

answer

declines

question

Average Variable Cost

answer

total variable cost/output

AVC= VC/Q

question

Average Total Cost

answer

equals Total Cost divided by Output

ATC= TC/Q

question

TC =

answer

FC + VC

question

ATC =

answer

AFC+ AVC

question

Marginal Cost

answer

the change in total cost per unit change in output, the slope of the total cost curve

question

Marginal Cost curve

answer

the curve that shows marginal cost as a function of output

question

AC curve is always __ -shaped

answer

U-shaped

question

MC eventually ______

answer

rises, due to the Law of Diminishing Returns.

question

Shapes on Cost Curves

answer

1) When MC < AC, AC is falling
2) When MC > AC, AC is rising
3) When MC = AC, AC = MC

question

MC rises when ____ falls, as more is produced

answer

MP (Marginal Product)

question

Costs in the Long-run

answer

All inputs are variable, long run is a series of short run opportunities

question

Economies of Scale

answer

Declining Long-run curve

question

Diseconomies of Scale

answer

Rising Long-run curve

question

Reasons for Economies of Scale

answer

specialization and division of labor

question

Reasons for Diseconomies

answer

Coordination, organization, and communication is inefficient

question

The firm's efficient scale is the quantity of output that minimizes

answer

Average Total Cost

question

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

answer

the size of a factory is fixed

question

When comparing short-run average total cost with long-run average total cost at a given level of output,

answer

short-run average total cost is typically above long-run average total cost.

question

The most likely explanation for economies of scale is

answer

specialization of labor

question

Firms may experience diseconomies of scale when

answer

large management structures are bureaucratic and inefficient

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