question
At any level of output
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average total cost will exceed average variable cost by the level of average fixed cost
question
IF the short-run average variable cost of production for a firm is decreasing then it follows that
answer
Marginal cost must be below average variable cost
question
Harvey quit his job at University where he earned $45,000. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000. To start the business he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company. IN the first year the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for cost of production.
The implicit costs of harvey's firm in the first year were
The implicit costs of harvey's firm in the first year were
answer
$60,000
question
If a firm's revenues just cover all its opportunity costs, then
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economic profit is zero
question
Marginal costs
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equals both average variable cost and average total cost at their respective minimums
question
According to the law of diminishing marginal returns
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the additional output generated by the additional units of an input will diminish
question
If all resources used in the production of a product are increased by 20% and output increases by 20% then there must be
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Constant returns to scale
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In the short run, Total output in an industry
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can vary as a result of using a fixed amount of plant and equipment more or less intensively
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Production costs to an economist
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reflect opportunity costs
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With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be
answer
800 units
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When a firm is experiencing economies of scale
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long run average total cost is decreasing
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Implicit costs are
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"payments: for self employed resources
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When a firm is experiencing diseconomies of scale, it should
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Expect its average total cost to decline if it reduced its scale of operations
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If marginal cost exceeds average total cost in the short run, then which is likely to be true?
answer
Average total cost is increasing
question
If you know that total fixed cost is $200, total variable cost is $600 and total product is 4 units then average total cost must be
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$200
question
in the long run, a firm will choose a plant size that has
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minimum average total cost of producing the target level of output
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The sole proprietor of the Milwaukee Company receives all accounting profits earned by her firm and $28,000 a year salary. She has a standing salary offer of $35,000 a year working for a large corporation. If she had invested her capital outside her own company, she estimates it would have returned $22,000 this year. If accounting profits for the year were $50,000 economic profits were
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21,000
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If the firm is producing at Q1 the area BADE represents
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Total fixed costs
bc
bottom to AVC is average variable costs
the entire thing is Total costs so
TC= TVC-TFC
bc
bottom to AVC is average variable costs
the entire thing is Total costs so
TC= TVC-TFC
question
Average fixed cost
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declines continually as output increases
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Economic profits are
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equal to the difference between accounting profits and implicit costs
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Marginal Cost an be defined as the change in
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total cost resulting from one more unit of production
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If all resources used in the production of a product are increased by 10% and output increases by less than 5% then the firm is experiencing
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diseconomies of scale
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If you know that with 8 units of output average fixed cost is $12.50 and average variable cost is $81.25, then total cost at this output level is
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$750
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Rising short run average variable costs of production for a firm indicate that
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marginal costs are above average variable costs
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Economic Profits are equal to
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total revenue minus the opportunity costs of all inputs
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