Costs and Production 4

Question 1

the ATC curve is ____ shaped

Answer 1

U shaped

Question 2

the MC curve is very special… When AVC is falling MC is below AVC

Answer 2

Where AVC is rising MC is above AVC

Question 3

At the minimum AVC,____ = ____

Answer 3

MC = AVC

Question 4

Where ATC is falling, ___ is below ___

Answer 4

MC is below ATC

Question 5

Where ATC is rising, ___ is above ___

Answer 5

MC is above ATC

Question 6

At the minimum ATC, ___ = ___

Answer 6

MC = ATC

Question 7

Marginal cost lies below AVC when AVC declining and above AVC when AVC is rising

Answer 7

MC= AVC when AVC is at its minimum

Question 8

MC is related to the marginal product of labor—>

Answer 8

MC = w/MP

Question 9

Total fixed costs

Answer 9

TFC

Question 10

Total variable costs

Answer 10

TVC

Question 11

total costs

Answer 11

TC

Question 12

average fixed costs

Answer 12

AFC

Question 13

average variable costs

Answer 13

AVC

Question 14

average total costs

Answer 14

ATC

Question 15

marginal cost

Answer 15

MC

Question 16

Position of short run cost curves depends on ___

Answer 16

technology and price of productive resources

Question 17

Increase in variable costs shifts TVC, AVC, and MC upward but leaves AFC and TFC unchanged

Answer 17

costs and production

Question 18

Long Run ATC

Answer 18

segments of short run ATC curves

-shows least average TC at which output can be produced after adjustments

Question 19

The ____ run average cost curve is made up from the lowest ATC for each output level

Answer 19

Long

Question 20

The _____ ____ ____ ___ is the relationship between the lowest attainable average total cost and output when both the plant size and labor are varied

Answer 20

long-run average cost curve

Question 21

The __________ is a planning curve that tells the firm the plant size that minimizes the cost of producing a given output range

Answer 21

long run average cost curve

Question 22

LRATC for all plants is portion of all short run ATC curves below each point of intersection

Answer 22

Long run average cost curve

Question 23

____ does not apply in long run because all resources are variable

Answer 23

law of diminishing returns

Question 24

_____ of scale are features of a firms technology that lead to falling long run average cost as output increases

Answer 24

economies of scale

Question 25

_____ of scale are features of a firms technology that lead to rising long run average cost as output increases

Answer 25

diseconomies of scale

Question 26

_____ to scale are features of a firms technology that lead to constant long run average cost as output increases

Answer 26

constant returns to scale

Question 27

_____ of scale: reductions in minimum average costs that come through increases in the size(scale) of plants and equipment

Answer 27

economies of scale

Question 28

Larger plants reduce minimum average costs | greater efficiency may come from

Answer 28

economie of scale

Question 29

reductions in unit costs resulting from increased size of operation -larger scale does not = proportional increase in all inputs

Answer 29

economies of scale

Question 30

if the plant size gets too big, however, long run average costs begin to rise, creating _____ of scale

Answer 30

diseconomies

Question 31

LRAC rises as output increase

Answer 31

diseconomies of scale

Question 32

increase in ATC resulting from problems in managing large scale operations

Answer 32

diseconomie of scale

Question 33

_______ efficiency-- goods produced in least costly way (lowest ATC)

Answer 33

production efficiency

Question 34

_____ efficiency--- apportionment of resources among firms and industries to obtain production of what society most wants

Answer 34

allocative efficiency

Question 35

resource allocation efficient if

Answer 35

- MC includes all costs of production | - product price accurately reflects all benefits society get from good