Prooo Flashcards
(25 cards)
What is the definition of production?
Production is the process of transforming inputs into outputs, typically goods or services.
True or False: Fixed costs change with the level of output.
False
What are variable costs?
Variable costs are expenses that change directly with the level of production.
Fill in the blank: The total cost is the sum of _____ and _____ costs.
fixed, variable
What does the term ‘opportunity cost’ refer to?
Opportunity cost is the value of the next best alternative that is foregone when making a decision.
What is marginal cost?
Marginal cost is the additional cost incurred when producing one more unit of a good or service.
Multiple Choice: Which of the following is a fixed cost? A) Rent B) Raw materials C) Labor
A) Rent
What is economies of scale?
Economies of scale refer to the cost advantages that a firm experiences as it increases its level of production.
True or False: Average cost decreases as production increases up to a certain point.
True
What is the formula for average cost?
Average cost is calculated by dividing total cost by the number of units produced.
Fill in the blank: The law of _____ states that as more of a resource is used, the additional output produced will eventually decrease.
diminishing returns
What is the relationship between production and cost in the short run?
In the short run, production increases lead to changes in variable costs while fixed costs remain constant.
Multiple Choice: Which of the following is NOT a type of cost? A) Sunk cost B) Incremental cost C) Opportunity cost D) Fixed cost E) Random cost
E) Random cost
What is a sunk cost?
A sunk cost is a cost that has already been incurred and cannot be recovered.
True or False: Total variable cost is equal to the variable cost per unit multiplied by the number of units produced.
True
What is the break-even point?
The break-even point is the level of production at which total revenue equals total costs, resulting in no profit or loss.
Fill in the blank: When total revenue exceeds total cost, a firm experiences _____ .
profit
What are external economies of scale?
External economies of scale occur when a firm’s costs decrease due to external factors, such as industry growth or improved infrastructure.
Multiple Choice: Which of the following can lead to diseconomies of scale? A) Management inefficiencies B) Increased production C) Improved technology
A) Management inefficiencies
What is the difference between short-run and long-run production?
In the short run, at least one factor of production is fixed, while in the long run, all factors can be varied.
True or False: Marginal cost can be constant regardless of the level of production.
False
What is the purpose of a cost function?
A cost function describes the relationship between production levels and the total costs incurred.
Fill in the blank: The _____ curve shows the relationship between the quantity produced and the total cost of production.
cost
What is the significance of the production possibility frontier (PPF)?
The PPF illustrates the maximum feasible amounts of two goods that can be produced with available resources.
