Measuring Total Cost - Assignment Essays

question

Total cost

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the opportunity cost of all inputs

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Total opportunity cost =

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explicit costs + implicit costs

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Explicit costs

answer

costs that require a money outlay (Maddie example singing business contract)

question

Implicit costs

answer

costs that do not require a cash outlay

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Cost of financial capital

answer

important component of a firm's cost of production

question

Profit =

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total revenue - total cost

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accounting cost includes:

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only explicit costs

question

economic costs include:

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both explicit + implicit costs (they bring the negative report)

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Accounting profit tends to be

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higher than economic profit

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Accounting profit =

answer

TR - (C explicit costs)

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Economic profit =

answer

TR - (C explicit costs + implicit costs)

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Short run

answer

the time frame in which some inputs are fixed

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Examples of short run

answer

physical capacity, quantity of good produced by increasing or decreasing labor

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Long run

answer

the time frame in which all inputs are variable

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What can vary with output in the long run?

answer

physical capital and all other inputs

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A firm experiences economies of scale when

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the long-run average total cost falls as it increases production.

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A firm experiences constant returns to scale when

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it can increase production without changing long-run average total cost.

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A firm experiences diseconomies of scale when

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The long-run average total cost increases as it increases production.

question

On the graph, to select the long run average total cost curve, you select the

answer

the point for each output level that corresponds to the lowest possible average total cost.

question

The law of diminishing marginal product of labor is demonstrated by which of the following?

answer

Total output increases at a decreasing rate as you increase the quantity of labor.

question

The marginal product of labor

answer

the change in output from hiring one additional unit of labor input

question

Fixed input

answer

an input whose quantity is fixed for a period of time 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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Production function

answer

relationship between an input and output of a good, holding other inputs constant

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Marginal product

answer

The increase in output from an additional unit of an input

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MP of labor =

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quantity of output/labor

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MP is the slope of the...

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production function

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MP diminishes as the quantity of the input...

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increases

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Production function gets flatter with...

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additional input

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If capital fixed...

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the productivity of the workers is diminished

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Marginal cost

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The increase in total cost due to an additional unit produced

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Fixed Costs (FC)

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Costs that do not vary with the quantity of output produced

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Variable Costs (VC)

answer

Costs that vary with the quantity of output produced

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TC =

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VC + FC

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VC =

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TC -FC

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FC =

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TC - VC

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TC and VC

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Increase

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AFC =

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FC/Q

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AVC =

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VC/Q or ATC - AFC

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ATC

answer

TC/Q or AFC + AVC

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When MC is below ATC...

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ATC is falling

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When MC is above ATC...

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ATC is rising

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MC and ATC intersect at the...

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Minimum ATC

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Long-run ATC (LRATC) shows...

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the lowest ATC possible at each Q when firm has the time to change labor and capital

question

Economies of Scale:

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ATC falls as Q increases

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Constant Returns to Scale:

answer

ATC remains constant as Q increases

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Diseconomies of Scale:

answer

ATC rises as Q rises

1 of 47

question

Total cost

answer

the opportunity cost of all inputs

question

Total opportunity cost =

answer

explicit costs + implicit costs

question

Explicit costs

answer

costs that require a money outlay (Maddie example singing business contract)

question

Implicit costs

answer

costs that do not require a cash outlay

question

Cost of financial capital

answer

important component of a firm's cost of production

question

Profit =

answer

total revenue - total cost

question

accounting cost includes:

answer

only explicit costs

question

economic costs include:

answer

both explicit + implicit costs (they bring the negative report)

question

Accounting profit tends to be

answer

higher than economic profit

question

Accounting profit =

answer

TR - (C explicit costs)

question

Economic profit =

answer

TR - (C explicit costs + implicit costs)

question

Short run

answer

the time frame in which some inputs are fixed

question

Examples of short run

answer

physical capacity, quantity of good produced by increasing or decreasing labor

question

Long run

answer

the time frame in which all inputs are variable

question

What can vary with output in the long run?

answer

physical capital and all other inputs

question

A firm experiences economies of scale when

answer

the long-run average total cost falls as it increases production.

question

A firm experiences constant returns to scale when

answer

it can increase production without changing long-run average total cost.

question

A firm experiences diseconomies of scale when

answer

The long-run average total cost increases as it increases production.

question

On the graph, to select the long run average total cost curve, you select the

answer

the point for each output level that corresponds to the lowest possible average total cost.

question

The law of diminishing marginal product of labor is demonstrated by which of the following?

answer

Total output increases at a decreasing rate as you increase the quantity of labor.

question

The marginal product of labor

answer

the change in output from hiring one additional unit of labor input

question

Fixed input

answer

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

question

Variable input

answer

an input whose quantity the firm can vary at any time

question

Production function

answer

relationship between an input and output of a good, holding other inputs constant

question

Marginal product

answer

The increase in output from an additional unit of an input

question

MP of labor =

answer

quantity of output/labor

question

MP is the slope of the...

answer

production function

question

MP diminishes as the quantity of the input...

answer

increases

question

Production function gets flatter with...

answer

additional input

question

If capital fixed...

answer

the productivity of the workers is diminished

question

Marginal cost

answer

The increase in total cost due to an additional unit produced

question

Fixed Costs (FC)

answer

Costs that do not vary with the quantity of output produced

question

Variable Costs (VC)

answer

Costs that vary with the quantity of output produced

question

TC =

answer

VC + FC

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VC =

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TC -FC

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FC =

answer

TC - VC

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TC and VC

answer

Increase

question

AFC =

answer

FC/Q

question

AVC =

answer

VC/Q or ATC - AFC

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ATC

answer

TC/Q or AFC + AVC

question

When MC is below ATC...

answer

ATC is falling

question

When MC is above ATC...

answer

ATC is rising

question

MC and ATC intersect at the...

answer

Minimum ATC

question

Long-run ATC (LRATC) shows...

answer

the lowest ATC possible at each Q when firm has the time to change labor and capital

question

Economies of Scale:

answer

ATC falls as Q increases

question

Constant Returns to Scale:

answer

ATC remains constant as Q increases

question

Diseconomies of Scale:

answer

ATC rises as Q rises

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