Midterm 2 (Production)

Question 1

explicit costs

Answer 1

monetary payment

Question 2

implicit costs

Answer 2

opportunity costs of owned resources

Question 3

economic costs =

Answer 3

explicit + implicit costs

Question 4

accounting profit

Answer 4

total revenue - explicit costs

Question 5

economic profit

Answer 5

total revenue - economic costs

Question 6

economists consider all

Answer 6

costs of production

Question 7

total product (TP) =

Answer 7

total output

Question 8

marginal product (MP) =

Answer 8

change in TP / change in L

Question 9

average product (AP) =

Answer 9

TP / L

Question 10

MP is the ___________ output produced as a result of utilizing ____ more unit(s) of a variable resource.

Answer 10

additional
one

Question 11

AP is the amount of output produced ____ ______ of a resource employed

Answer 11

per unit

Question 12

increasing marginal returns

Answer 12

increase in marginal productivity

Question 13

fixed costs examples

Answer 13

rent, insurance premiums

Question 14

variable costs examples

Answer 14

more labor, materials

Question 15

diminishing marginal returns

Answer 15

decrease in marginal productivity

Question 16

Total cost (TC)

Answer 16

TFC + TVC

Question 17

“too many cooks in the kitchen”

Answer 17

diminishing marginal returns

Question 18

AFC + AVC =

Answer 18

ATC

Question 19

on a graph, _____ always declines with additional output, while _____ and _____ decline then increase

Answer 19

AFC
AVC
ATC

Question 20

MC =

Answer 20

change in TC / output (Q)

Question 21

When ATC and AVC meet MC, that is their _________ point

Answer 21

lowest

Question 22

An average value ________ when a marginal value rises above it, and ________ when it falls below it.

Answer 22

increases
decreases

Question 23

each ATC (small curve) on an LRATC graph represents what?

Answer 23

a different level of output

Question 24

economies of scale

Answer 24

left/green, decreasing avg. total cost, increasing output

Question 25

constant returns to scale

Answer 25

middle/yellow, stable avg. total cost, increasing output

Question 26

diseconomies of scale

Answer 26

right/red increasing avg. total cost, increasing output