question
Sunk costs
answer
are irrelevant to economic decision making
question
The difference between the economic and accounting costs of a firm are
answer
a. the opportunity costs of the factors of production that the firm owns.
question
fixed costs are fixed with respect to changes in
answer
output
question
which of the following costs always declines as output increases
answer
average fixed cost
question
The total cost (TC) of producing computer software diskettes (Q) is given as
TC = 200 + 5Q
What is the variable cost?
TC = 200 + 5Q
What is the variable cost?
answer
5Q
question
The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. For 100 cookies, the average total cost is
answer
falling
question
In a short-run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus,
answer
marginal cost is below average variable cost
question
Which of the following costs are always increasing as output increases?
answer
total cost and variable cost
question
An isocost line reveals the
answer
input combinations that can be purchased for a given total cost
question
When an isocost line is just tangent to an isoquant, we know that
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output is being produced at minimum cost
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The total cost of producing a given level of output is
answer
minimized when the marginal products of all inputs are equal
question
Suppose that the price of labor (PL) is $10 and the price of capital (PK) is $20. What is the equation of the isocost line corresponding to a total cost of $100?
answer
100 = 10L + 20K
question
A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm
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could reduce the cost of producing its current output level by employing more labor and less capital.
question
A firm wants to minimize the total cost of producing 100 tons of dynamite. The firm uses two factors of production, chemicals and labor. The combination of chemicals and labor that minimizes production costs will be found where
answer
the production of an additional unit of dynamite costs the same regardless of whether chemicals or labor are used.
question
A firm's short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's economies of scale?
answer
The short-run average cost curve reveals nothing regarding economies of scale.
question
Generally, economies of scope are present when
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joint output is greater from a single firm producing two goods than could be achieved by two different firms each producing a single product (assuming equivalent production inputs in both situations).
question
The equation below gives the degree of economies of scope (SC):
SC = [C(Q1) + C(Q2) - C(Q1,Q2)]/C(Q1,Q2)
, where C(Q1) is the cost of producing output Q1 and C(Q2) is the cost of producing output Q2, and C(Q1,Q2) is the joint cost of producing both outputs. If SC is negative
SC = [C(Q1) + C(Q2) - C(Q1,Q2)]/C(Q1,Q2)
, where C(Q1) is the cost of producing output Q1 and C(Q2) is the cost of producing output Q2, and C(Q1,Q2) is the joint cost of producing both outputs. If SC is negative
answer
there are diseconomies of scope
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