Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Economics T3 - Production and costs > Flashcards

Economics T3 - Production and costs Flashcards

1
Q

For an owner-operated firm, its total cost of production for any given output:

is equal to its explicit costs plus implicit costs.

is its implicit costs minus explicit costs.

is its explicit costs minus implicit costs.

is that firm’s total cash outlay to produce that output.

all of the above

none of the above

A

is equal to its explicit costs plus implicit costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When another unit of a variable input will add more to total revenue than it costs to use, that unit of input:

cannot be profitably used.

is one whose MR is greater than its MC.

is one whose MR is zero or less.

has no functional relationship to output or profit.

all of the above

none of the above

A

is one whose MR is greater than its MC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Fixed cost, by definition, is the cost of producing one more unit of output.

True

False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When average physical product (grain yield per acre, for example) begins to decrease, you should stop adding more fertilizer.

True

False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

It is possible for the opportunity cost of an input to be very low or zero if there is no alternative use for it.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Stage II of the production function is that part of the function where both APP and MPP are positive and declining.

True

False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

At the level of input and output where marginal revenue is equal to marginal cost, profit will always be positive.

True

False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Marginal physical product is the addition to total physical product that is obtained by using one more unit of the variable input.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The law of diminishing marginal returns means that as the level of input is increased:

the product selling price decreases

the amount of product produced increases faster than the amount of input used

the amount of product produced increases at the same rate as the amount of input used

the amount of product produced increases more slowly than the amount of input used

A

the amount of product produced increases faster than the amount of input used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

A production process requires at least one fixed input for the law of diminishing returns to be in effect.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Economics is a bit poo but we’ll be OK because we’re awesome

True?

A

TRUE.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A production function describes the relationship between resources and their product.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A declining long run average cost curve indicates that economies of size are available.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

AFC is constant as output increases.

True

False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Farmers would be fairly happy to make zero economic profit.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The word ‘capital’ as used in economics refers to:

farmer’s machinery and equipment.

a graziers breeding animals. X

potting mix and pots that are being used to produce potted plants.

man-made assets of value that can produce other goods X

All answers are correct X

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

The marginal cost is the amount that is added to total cost when another unit of the variable input is used.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

MR is greater than AR within Stage II of the production function.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

If the ATC at a given output is $10, and AFC at that output is $4, AVC must therefore be $6.

True

False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

If a farmer is producing at some point where MR is greater than MC and the amount of input available is not limited:
profit is not being maximized
more input should be used to maximize profit
more output should be produced to maximize profit
all of the above

A

all of the above:

  • profit is not being maximized
  • more input should be used to maximize profit
  • more output should be produced to maximize profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q 
In perfect competition the competitive firm's demand curve for a variable output is
		its entire total revenue curve.
		its entire MC curve.
		its entire MR curve.
		it s MR curve in Stage II only.
		All answers are correct
A

Its entire MR curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

T/F
The law of diminishing productivity states that ‘as successive amounts of a variable input are combined with a fixed input, the total product will increase, reach a maximum, and eventually decline.’

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The law of diminishing marginal returns means that as the level of input is increased:
the product selling price decreases
the amount of product produced increases faster than the amount of input used
the amount of product produced increases at the same rate as the amount of input used
the amount of product produced increases more slowly than the amount of input used

A

the amount of product produced increases more slowly than the amount of input used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

T/F

A declining long run average cost curve indicates that economies of size are available.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

A horse trainer s MR curve for an input (such as oats) will shift if
the price of oats increases.
the price of oats decreases.
the efficiency of oat utilisation is changed because oat digestibility has increased.
the MC of oats changes. X
All answers are correct X

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

T/F

Total variable cost must always increase as the firm’s output is increased, ceteris paribus.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

T/F

A production function describes the relationship between resources and their product.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

T/F

Implicit costs are the same as opportunity costs.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q 
The cost of producing an additional unit of output is
		average variable cost.
		marginal cost.  ← correct
		average total cost.
		average fixed cost
		all of the above
		none of the above
A

marginal cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

T/F

The marginal cost is the amount that is added to total cost when another unit of the variable input is used.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

T/F
To optimise the use of a variable input it should be used to the point where its addition to costs just equals its addition to total revenue.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

T/F

Marginal cost, by definition, is the additional cost incurred in using another unit of input.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q 
The time period which is short enough that the firm is able to vary the quantities of some (but not all) of its resources is called
		the long run.
		the short run.
		a period of increasing returns.
		a period of constant returns.
		All answers are correct
A

The short run

34
Q

Marginal physical product
is the number of units of input X1 per unit of input X2.
is the total cost of producing one more unit of output.
is the units of output produced by one more unit of input.
cannot be determined until dollar values are known.
all of the above
none of the above

A

is the units of output produced by one more unit of input.

35
Q

T/F

Depreciation is classified as a cash cost.

A

False

36
Q

Which of the following would not cause economies of size to result if a particular farm or ranch expanded production?
A large harvesting machine is used over more acres per year X
Travel time to transport crops or dispose of manure is increased
Volume discounts on the purchase price of inputs can be negotiated
Employees are assigned fewer types of tasks to perform X

A

.

37
Q

T/F

Diminishing marginal returns occur due to biological limitations.

A

True

38
Q

T/F

Stage III of the production function is characterised by a negative APP.

A

False

39
Q

T/F

A production process requires at least one fixed input for the law of diminishing returns to be in effect

A

True

40
Q

T/F

ATC will decrease at first, then increase as more and more output is produced.

A

True

41
Q

T/F

MC is equal to the change in TVC divided by the change in output.

A

True

42
Q

T/F

It is possible for the opportunity cost of an input to be very low or zero if there is no alternative use for it.

A

True

43
Q 
The dividing line between Stage I and Stage II is determined on a production function graph at
		the point of maximum TPP.
		the point of maximum MPP X
		the point of maximum APP.
		the point of zero MPP.
		All answers are correct
A

.

44
Q

T/F
Marginal physical product is the addition to total physical product that is obtained by using one more unit of the variable input.

A

True

45
Q

A production function tells us
the relationship between inputs and their product. X
the output to be obtained from different quantities of the variable input used X
the units of variable input that would be required to produce a given level of output.
how much product a marginal unit of the variable input will produce.
all of the above

none of the above

A

.

46
Q 
If the purchase price of an input decreases, a profit maximizing farmer should
		use more input and produce more output
		use more input and produce less output
		use less input and produce more output
		use less input and produce less output
A

use more input and produce more output

47
Q

T/F

Doubling both input and output price will not change the profit maximizing input and output level.

A

True

48
Q 
If MPP is less than APP, then APP:
		is decreasing
		is increasing X 
		is constant X
		may be doing any of the above
A

.

49
Q

T/F
To maximize total profit, farms or ranches should produce the level of output at which average total cost per unit is minimized.

A

False

50
Q

T/F

Labor can be either a cash expense or an opportunity cost.

A

True

51
Q

Cattle on feed should be marketed when:
their average cost of gain is no longer below their selling price
their marginal cost of gain is no longer below their selling price
their marginal cost of gain is no longer below their original purchase price
they have reached their maximum weight

A

their marginal cost of gain is no longer below their selling price

52
Q

T/F

At the level of input and output where marginal revenue is equal to marginal cost, profit will always be positive.

A

False

53
Q 
To compute marginal cost you would use:
		total cost divided by output
		total cost divided by input
		change in total cost divided by input
		change in total cost divided by change in output
A

change in total cost divided by change in output

54
Q

The opportunity cost of one more unit of a variable input is:
its market value at the time of its use
its cost at time of purchase
the return from using that input in its next best alternative use
the same as its marginal cost

A

the return from using that input in its next best alternative use

55
Q

T/F

Marginal revenue is equal to the output price as long as that price is constant.

A

.

56
Q

In the short run, production should be discontinued whenever:
total revenue is less than total variable cost
total revenue is less than total cost X
total revenue is less than total fixed cost
total revenue is greater than total fixed cost

A

.

57
Q

At the output level where MC is just equal to ATC:
ATC is increasing
ATC is decreasing
ATC could be either increasing or decreasing
ATC is at its minimum value

A

.

58
Q

T/F

AFC is constant as output increases.

A

.

59
Q

T/F

Marginal cost can be calculated by the change in total cost divided by the change in input.

A

F. Its the change in cost/change in number of units

60
Q

T/F

Stage II of the production function is that part of the function where both APP and MPP are positive and declining.

A

True

61
Q

T/F

Both fixed and variable costs exist in the short run.

A

True

62
Q

T/F

As a general rule, if the price of the output increases, you should use more input to maximize profit.

A

True

63
Q 
A production function is in the amount of physical product obtained with different:
		levels of input
		output prices
		input prices
		ratios of input and output prices
A

Levels of input

64
Q 
Which of the following activities can be called 'production'?
		making a bowl of soup for your lunch.
		polishing your shoes.
		advising a farmer on herbicide use.
		producing cotton for the market X

All answers are correct

A

All answers are correct

65
Q

T/F

When APP is increasing, MPP will be less than APP because of diminishing productivity.

A

False

66
Q

In the short run:
total fixed costs are zero when there is no production
total variable costs are zero when there is no production
total costs are zero when there is no production
neither total fixed costs nor total variable costs are zero when there is no production

A

total variable costs are zero when there is no production

67
Q

T/F

The marginal product of a resource is measurable in physical terms but not in value terms.

A

True

68
Q

T/F

MR is greater than AR within Stage II of the production function.

A

True

69
Q

T/F
The increase in MC that accompanies increased output occurs because of diminishing marginal productivity of the firm’s variable resources.

A

True

70
Q 
Which of the following costs are computed per unit of output?
		AFC
		AVC
		ATC
		all of the above
A

All of the above

71
Q

T/F

Diminishing marginal productivity results from changing input proportions.

A

False

72
Q

T/F

MPP can never be negative.

A

F.

AVERAGE physical product is never negative

73
Q

T/F

Variable costs such as seed and fertilizer that have already been paid for and applied are called sunk costs.

A

True

74
Q

T/F

Fixed cost, by definition, is the cost of producing one more unit of output.

A

False

75
Q

When another unit of a variable input will add more to total revenue than it costs to use, that unit of input
cannot be profitably used.
is one whose MR is greater than its MC.
is one whose MR is zero or less.
has no functional relationship to output or profit.
all of the above

none of the above

A

One whose MR is greater than its MC

76
Q

T/F
Because it is possible for resources to be combined in many different ways, it is not possible to determine the marginal productivity of any single one of them.

A

False

77
Q

The marginal cost curve:
will eventually increase as output is increased
will eventually decrease as output is increased
is constant regardless of output level
has the same shape as a marginal revenue curve

A

Will eventually increase as output is increased

78
Q

T/F

The law of diminishing productivity applies only to those production situations where all resources are variable.

A

F.

Resources must stay constant to apply

79
Q 
Fixed costs that result from owning farm assets such as machinery include all but which of the following:
		Fuel and lubrication
		DepreciationX
		Insurance X
		Interest
A

.

80
Q

There are increasing returns to size whenever increasing the output of the business results in:
a larger average cost per unit of output
a smaller average cost per unit of output
the same average cost per unit of output
increased total profit

A

a smaller average cost per unit of output

81
Q 
The time period which is short enough that the firm is able to vary the quantities of some (but not all) of its resources is called
		the long run.
		the short run.
		a period of increasing returns.
		a period of constant returns.
		All answers are correct
A

.

Economics (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions