Handout 5 Flashcards
A firm’s total profit equals its marginal revenue minus its marginal cost.
False
Profit equals total revenue minus total cost.
True
The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.
True
Accounting profit is greater than or equal to economic profit.
True
Implicit costs are costs that do not require an outlay of money by the firm.
True
Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.
False
A second or third worker may have a higher marginal product than the first worker in certain circumstances.
True
In the short run, if a firm produces nothing, total costs are zero.
False
For a typical firm, fixed costs increase in direct proportion to the increases in output.
False
The shape of the total-cost curve is unrelated to the shape of the production function.
False
Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.
True
Variable costs equal fixed costs when nothing is produced.
False
Average variable cost is equal to total variable cost divided by quantity of output.
True
If the marginal-cost curve is rising, then so is the average-total-cost curve.
False
If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.
True
The shape of the marginal cost curve tells a producer something about the marginal product of her workers.
True
When average total cost is above marginal cost, average total cost is rising.
False
Fixed costs are those costs that remain fixed no matter how long the time horizon is.
False
For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal.
True
A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.
True
A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.
True
Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.
True
In competitive markets, firms that raise their prices are typically rewarded with larger profits.
False
In a competitive market, firms are unable to differentiate their product from that of other producers.
True




