Intro to Microeconomics Chapter 11

question

production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces
-minimizes costs and maximizes output

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fixed input

answer

an input whose quantity is fixed for a period and cannot be varied

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variable input

answer

an input whose quantity the firm can vary at any time

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long run

answer

the period in which all inputs can be varied

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short run

answer

the period in which at least one input is fixed

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total product curve

answer

shows how the quantity of output depends on the quantity of the variable inputs for a given quantity of the fixed input

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total product (Q)

answer

total quantity or total output of a particular good or service produced
-sum of MP
-aka total output

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marginal product (MP)

answer

extra output or added product associated with adding a unit of variable resource
-the change in output resulting from a one-unit increase in the amount of labor input
-initially rises as more workers are hired, then it declines
-derivative of TP

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marginal product of labor

answer

change in total product/change in labor input
∆Q/∆L

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decline

answer

diminishing returns starts when marginal product starts to...

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decreasing; flattening

answer

during diminishing returns, the output starts to increase at a __________ rate and the slope is __________

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b) the second worker

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If one worker makes 14 baskets, two workers make 34 baskets, three workers make 45 baskets, and four workers make 50 baskets, which worker yielded the highest marginal product?
a) The first worker
b) The second worker
c) The third worker
d) The fourth worker

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b) total product curve

answer

Marginal product is the slope of the:
a) Marginal cost curve
b) Total product curve
c) Long-run average total cost curve
d) Total cost curve

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fixed cost

answer

a cost that does not depend on the quantity of output produced; the cost of the fixed input
-costs that do not vary with output
Ex. property tax, insurance, lease, security system

question

variable cost

answer

a cost that depends on the quantity of output produced; the cost of the variable input
-costs that vary with output

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total cost (TC)
TC = FC + VC

answer

of producing a given quantity of output is the sum of the fixed cost and the variable cost of producing that quantity of output
FC + VC

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steeper

answer

the total cost curve becomes _______ as more output is produced, a result of diminishing returns

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marginal cost (MC)
MC = ∆TC/∆Q

answer

the change in total cost generated by one additional unit of output
∆TC/∆Q
-the derivative of TC

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increasing

answer

If MP is declining, then MC is __________

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declines

answer

(in diminishing returns to inputs) as output increases, the marginal product of the variable input ________
-implies the more and more of the variable input must be used to produce each additional unit of output as the amount of output already produced rises
-since each unit of the variable input must be paid for, the cost per additional unit of output also rises

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average product (AP)

answer

Q/L

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average total cost (ATC)
(aka average cost)

answer

total cost per unit of output produced
TC/Q

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average fixed cost (AFC)

answer

fixed cost per unit of output produced
FC/Q

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average variable cost (AVC)

answer

variable cost per unit of output produced
VC/Q

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the spreading effect and the diminishing return effect

answer

increasing output has two opposing effects on average total cost:

question

the spreading effect

answer

the larger the output, the more output over which fixed cost is spread, leading to lower average fixed cost

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the diminishing return effect

answer

the larger the output, the more variable input required to produce additional units, which leads to higher average variable cost

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long

answer

all inputs are variable in the ____ run. this means that in the ____ run, fixed cost (like factory size) may also vary

question

level of output

answer

the firm will choose its fixed cost in the long run based on the _____ __ ______ it expects to produce

question

higher; lower

answer

there is a trade-off between ______ fixed cost and _____ variable cost for any given output level and vice versa

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lower

answer

At low Q, low fixed cost yields _____ average total cost

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lower

answer

at high Q, high fixed cost yields _____ average total cost

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increasing returns to scale (economies of scale)

answer

when long-run average total cost declines as output increases

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decreasing returns to scale (diseconomies of scale)

answer

when long-run average total cost increases as output increases

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constant returns to scale

answer

when long-run average total cost is constant as output increases

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The long-run average total cost curve shows the relationship between output and the average total cost when fixed cost has been chosen to minimize _____ for each level of output.

answer

average total cost

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If long-run average total cost declines when output is increasing, then the cost curves exhibit _____ returns to scale.

answer

increasing

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The long-run average total cost curve is tangent to a series of short-run _____ cost curves.

answer

average total

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A high-tech firm has large initial start-up costs. These large initial setup costs are a source of _____.

answer

increasing returns to scale/ economies of scale

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causes marginal cost to rise.

answer

diminishing returns

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long-run .

answer

Decreasing returns to scale is a ____ concept.

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specialization

answer

The reason for the slope to dec on the short-run marginal cost curve is:

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diminsihing returns

answer

The reason for the slope to ince on the short-run marginal cost curve is:

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decreasing returns to scale; slope of cost vs output is increasing

answer

most likely experiencing problems of coordination and communication

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If a firm is experiencing constant returns to scale, it will be able to increase output without any increase in _____.

answer

long-run average total cost

question

increasing returns to scale

answer

A source of _____ is when individual workers become more skilled and efficient at performing specialized tasks.

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dis-economis of scale

answer

decreasing; goes up on curve

1 of 47

question

production function

answer

the relationship between the quantity of inputs a firm uses and the quantity of output it produces
-minimizes costs and maximizes output

question

fixed input

answer

an input whose quantity is fixed for a period and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

long run

answer

the period in which all inputs can be varied

question

short run

answer

the period in which at least one input is fixed

question

total product curve

answer

shows how the quantity of output depends on the quantity of the variable inputs for a given quantity of the fixed input

question

total product (Q)

answer

total quantity or total output of a particular good or service produced
-sum of MP
-aka total output

question

marginal product (MP)

answer

question

marginal product of labor

answer

change in total product/change in labor input
∆Q/∆L

question

decline

answer

diminishing returns starts when marginal product starts to...

question

decreasing; flattening

answer

during diminishing returns, the output starts to increase at a __________ rate and the slope is __________

question

b) the second worker

answer

question

b) total product curve

answer

Marginal product is the slope of the:
a) Marginal cost curve
b) Total product curve
c) Long-run average total cost curve
d) Total cost curve

question

fixed cost

answer

a cost that does not depend on the quantity of output produced; the cost of the fixed input
-costs that do not vary with output
Ex. property tax, insurance, lease, security system

question

variable cost

answer

a cost that depends on the quantity of output produced; the cost of the variable input
-costs that vary with output

question

total cost (TC)
TC = FC + VC

answer

of producing a given quantity of output is the sum of the fixed cost and the variable cost of producing that quantity of output
FC + VC

question

steeper

answer

the total cost curve becomes _______ as more output is produced, a result of diminishing returns

question

marginal cost (MC)
MC = ∆TC/∆Q

answer

the change in total cost generated by one additional unit of output
∆TC/∆Q
-the derivative of TC

question

increasing

answer

If MP is declining, then MC is __________

question

declines

answer

question

average product (AP)

answer

Q/L

question

average total cost (ATC)
(aka average cost)

answer

total cost per unit of output produced
TC/Q

question

average fixed cost (AFC)

answer

fixed cost per unit of output produced
FC/Q

question

average variable cost (AVC)

answer

variable cost per unit of output produced
VC/Q

question

the spreading effect and the diminishing return effect

answer

increasing output has two opposing effects on average total cost:

question

the spreading effect

answer

the larger the output, the more output over which fixed cost is spread, leading to lower average fixed cost

question

the diminishing return effect

answer

the larger the output, the more variable input required to produce additional units, which leads to higher average variable cost

question

long

answer

all inputs are variable in the ____ run. this means that in the ____ run, fixed cost (like factory size) may also vary

question

level of output

answer

the firm will choose its fixed cost in the long run based on the _____ __ ______ it expects to produce

question

higher; lower

answer

there is a trade-off between ______ fixed cost and _____ variable cost for any given output level and vice versa

question

lower

answer

At low Q, low fixed cost yields _____ average total cost

question

lower

answer

at high Q, high fixed cost yields _____ average total cost

question

increasing returns to scale (economies of scale)

answer

when long-run average total cost declines as output increases

question

decreasing returns to scale (diseconomies of scale)

answer

when long-run average total cost increases as output increases

question

constant returns to scale

answer

when long-run average total cost is constant as output increases

question

The long-run average total cost curve shows the relationship between output and the average total cost when fixed cost has been chosen to minimize _____ for each level of output.

answer

average total cost

question

If long-run average total cost declines when output is increasing, then the cost curves exhibit _____ returns to scale.

answer

increasing

question

The long-run average total cost curve is tangent to a series of short-run _____ cost curves.

answer

average total

question

A high-tech firm has large initial start-up costs. These large initial setup costs are a source of _____.

answer

increasing returns to scale/ economies of scale

question

causes marginal cost to rise.

answer

diminishing returns

question

long-run .

answer

Decreasing returns to scale is a ____ concept.

question

specialization

answer

The reason for the slope to dec on the short-run marginal cost curve is:

question

diminsihing returns

answer

The reason for the slope to ince on the short-run marginal cost curve is:

question

decreasing returns to scale; slope of cost vs output is increasing

answer

most likely experiencing problems of coordination and communication

question

If a firm is experiencing constant returns to scale, it will be able to increase output without any increase in _____.

answer

long-run average total cost

question

increasing returns to scale

answer

A source of _____ is when individual workers become more skilled and efficient at performing specialized tasks.

question

dis-economis of scale

answer

decreasing; goes up on curve

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