EC120 Chapter Notes - Chapter 13: Sunk Costs, Marginal Cost, Marginal Product

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13 Feb 2013

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All costs can vary in the long-run. An example of explicit costs are the payments made by the firm to others. An example of implicit costs is the opportunity cost of resources owned by the firm. A firm"s economic profit is equal to the difference between its revenues and its opportunity costs. Variable cost in the short-run: a new wing on the plant (?) What best characterizes fixed costs is that they are costs that do not vary with output. Marginal cost is the increase in total cost that arises from an extra unit of production. Economies of scale explain why average cost declines in the long run. As production increases, a unit"s share of fixed costs continually decreases as output increases ( doesn"t it stay constant??) Average cost is best defined as tc / q. Marginal cost equals atc at its min. The marginal product is essentially the additional unit of output per unit of input.

Related Questions

36) A firm encountering economies of scale over some range of output will have a:

a) rising long-run average cost curve.

b) falling long-run average cost curve.

c) constant long-run average cost curve.

d) rising, then falling, then rising long-run average cost curve.

37) When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) a violation of the law of diminishing returns.

38) The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:

a) economies of scale.

b) normative economies.

c) diminishing marginal returns.

d) an increasing marginal product of labor.

39) If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) increasing the average total costs.

40) Economies and diseconomies of scale explain why the:

a) short-run average fixed cost curve declines so long as output increases.

b) marginal cost curve must intersect the minimum point of the firm's average total cost curve.

c) long-run average total cost curve is typically U-shaped.

d) short-run average variable cost curve is U-shaped.

jadeshark411

constant costs

increasing returns to scale

constant returns to scale

isocost curve

decreasing returns to scale

isoquant

diseconomies of scale

long-run average cost

economies of scale

long-run marginal cost

economies of scope

marginal rate of technical substitution

expansion path

short-run expansion path

___A curve that displays all the various combinations of inputs that will produce a given amount of output.

___The rate at which one input is substituted for another along an isoquant.

___Line that shows all the possible combinations of inputs that can be purchased for a given total cost.

___A curve showing all of the cost-minimizing levels of input usage for various levels of output.

___When the usage of all inputs is increased by an equal proportionate amount, output ___increases by exactly the same proportion.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a larger proportionate amount.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a smaller proportionate amount.

___Cost per unit in the long run.

___The change in long-run total cost per unit change in output.

___When long-run average cost falls as output increases.

___When long-run average cost increases with increases in output.

___Long-run average and marginal costs are equal for all levels of output.

___The situation in which the joint cost of producing two goods is less than the sum of the separate costs of producing the two goods.

___Horizontal line showing the cost-minimizing input combinations for various output levels when capital is fixed in the short run.

aquamarineguinea-pig889

A natural monopoly occurs when:

a. long-run average cost declines continuously through the range of demand.

b., a firm owns and controls an essential resource for production.

c. long-run average cost rises continuously as output increases.

d. economies of scale are obtained at relatively low output levels.

brownantelope470

EC120 Chapter Notes - Chapter 13: Sunk Costs, Marginal Cost, Marginal Product

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