Easy
The operation of all businesses and industries typically fall into these three sectors of production:
the cultivation of nature resources, the processing and fabrication of goods, and the provision of services
Suppose that a business had implicit costs of $500 000 and had explicit costs of $5 million in a specific year. If in that year the firm sold 100 000 units of its output at $50 per unit, its accounting:
profits were zero and its economic losses were $500 000
The total output of a firm will be maximum where:
MP is zero
Marginal cost:
rises as long as marginal product continues to fall.
Marginal cost:
Intersects both the average variable cost and the average cost curves at the minimum points.
A labour-intensive process of production employs:
more labour and less capital than other possible production processes
To economists, the main difference between "the short run" and "the long run" is that:
in the long run, all resources are variable while in the short run, at least one resource is fixed
Which of the following is most likely to be a fixed cost?
property insurance premiums
Average variable cost:
Graphs as a saucer-shaped curve
If average cost is declining, then:
Marginal cost must be less than average cost.
Businesses choose from several production processes by:
producing a given level of output with a process that minimizes costs
If, in the production of boxer shorts, labour is the variable input and sewing machinery is the fixed input, total product can be found by determining output:
at each level of labour employment holding capital employment constant
Kline Shirts employs labour at $5 per hour and uses capital equipment that costs $80 per day to produce women's cotton shirts. The company's total cost, given 100 hours of labour, is:
$580
If the difference between average cost (AC) and average variable cost (AVC) at 200 units is $5, at 400 units of output, the difference between AC and AVC must be:
Less than $5
The relationship between the marginal cost and the average cost schedules is such that:
If MC is below AC, AC must be declining.
An explicit cost is:
a payment made for resources not owned by the business itself
Marginal product is the:
increase in total output attributable to the employment of one more worker
Marginal cost may be defined as the:
change in total cost that results from producing one more unit of output
Average fixed cost:
Declines so long as output increases.
In the long run:
The law of diminishing marginal returns no longer has the same importance as in the short run.
Implicit and explicit costs are different in that:
implicit costs refer to nonexpenditure costs and explicit costs to out-of-pocket costs
If in the short run a business's total product is increasing, we know that:
marginal product could be either increasing or decreasing
If total cost is $30 at 10 units of output and $32 at 11 units of output, in this range of output, marginal cost is:
Average fixed cost:
Declines so long as output increases.
One possible explanation for increasing returns to scale is:
Increased specialization in production tasks.