Chapter 13 - The Costs of Production

Question 1

Total Revenue

Answer 1

The amount a firm receives for the sale of its output.

Question 2

Total Cost

Answer 2

The market value of the inputs a firm uses in production.

Question 3

Profit = ?

Answer 3

(Total Revenue) - (Total Cost)

Question 4

Explicit Costs

Answer 4

Input costs that require an outlay of money by the firm.

Question 5

Implicit Costs

Answer 5

Input costs that do not require an outlay of money by the firm (opportunity costs).

Question 6

Economic Profit

Answer 6

(Total Revenue) - (Explicit Costs + Implicit Costs)

Question 7

Accounting Profit

Answer 7

(Total Revenue) - (Total explicit costs)

Question 8

Production Function

Answer 8

The relationship between quantity of inputs used to make a good & the quantity of output of that good.

Question 9

Marginal Product

Answer 9

The increase in output that arises from an additional unit of input

Question 10

Diminishing marginal product

Answer 10

The property whereby the marginal product of an input declines as the quantity of the input increases.

Question 11

Fixed Costs

Answer 11

Costs that do not vary with the quantity of output produced.

Question 12

Variable Costs

Answer 12

Costs that vary with the quantity of output produced.

Question 13

Total Cost = ?

Answer 13

(Fixed Costs) + (Variable Costs)

Question 14

Average Total Cost

Answer 14

(Total Cost) / (Quantity of output)

Question 15

Average Fixed Cost

Answer 15

(Fixed Cost) / (Quantity of output)

Question 16

Average Variable Cost

Answer 16

(Variable Cost) / (Quantity of output)

Question 17

Marginal Cost

Answer 17

The increase in total cost that arises from an extra unit of production.

Question 18

Marginal Cost = ?

Answer 18

(Chang in Total Cost) / (Change in Quantity of output)

Question 19

Marginal Cost graph rises as quantity of output increases because of _________?

Answer 19

Diminishing marginal product.

Question 20

The bottom of the U-Shaped ATC curve occurs at the quantity that ______ ATC.

Answer 20

Maximizes

Question 21

Efficient Scale

Answer 21

The quantity of output that maximizes the ATC

Question 22

Whenever marginal cost is ______ than ATC, ATC is falling. When marginal cost is ______ than ATC, ATC is rising.

Answer 22

Less, greater

Question 23

Economies of Scale

Answer 23

The property whereby long-run ATC falls as quantity of output increases

Question 24

Diseconomies of Scale

Answer 24

The property whereby long-run ATC rises as quantity of output increases.

Question 25

Constant Returns of Scale

Answer 25

The property whereby long-run ATC stats the same as the quantity of output changes.