by clmosk

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Total Fixed Cost (TFC)
The total of all costs that do not change with output, even if output is zero.
Average Variable Cost (AVC)
Total variable costs divided by the number of units of output, a per-unit measure of variable costs.  
Total Variable Cost (TVC)
The total of all costs that vary with output in the short-run.
Average Fixed Cost (AFC)
Total fixed cost divided by the number of units of output; a per-unit measure of fixed costs.
Marginal Cost (MC)
The increase in total cost that results from producing one more unit of output. Marginal costs reflect changes in variable costs.
Average Total Cost (ATC)
Total cost divided by the number of units of output.
Increasing Returns to Scale, or Economies of Scale
An increase in a firm's scale of production leads to lower average costs per unit produced.
Constant Return to Scale
An increase in a firm's scale of production has no effect on average costs per unit produced.
Decreasing Returns to Scale, or Diseconomies of Scale
An increase in a firm's scale of production leads to higher average costs per unit produced.
Which of the following is not an explicit cost?
the value of a firm owner's time
A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?
Economic profit is defined as
total revenue minus implicit and explicit costs
Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30,000 per year, to open up a store selling spot remover to Dalmatians. He invested $10,000 in the store, which had been in savings earning 5 percent interest. This year's revenues in the new business were $50,000, and explicit costs were $10,000. Calculate Ernie's accounting profit.
Normal profit is defined as
profit necessary to ensure that opportunity costs are covered
Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,
her economic profit from textbooks will fall
The short run is a period of time
during which at least one resource is fixed
Increasing marginal returns are generally the result of
specialization and division of labor
When diminishing marginal returns set in, marginal product is
positive and decreasing
Fixed costs are defined as
costs that do not vary as quantity produced increases
Which of the following best explains why marginal cost eventually increases as output increases?
marginal product decreases
Suppose Guild produces 5,000 guitars per year. Its average total cost is $90, and its fixed cost is $250,000. What is its variable cost?
On a graph of production costs, the vertical distance between the fixed cost curve and the total cost curve at a specific quantity represents
variable cost
If the average height in the classroom were 5 feet 10 inches and Patrick Ewing, who is 7 feet tall, came in and sat down,
the average height would rise somewhat
Long-run VARIABLE costs are the same as long-run TOTAL costs
If General Electric finds that when it doubles both its plant size and the amount of associated inputs, its output level does not double, then
the firm is experiencing diseconomies of scale
A production function        
shows the relationship between quantities of inputs used and quantity of output produced
Upon opening a printing and copy shop, a firm budgets $40,000 for copy machines and labor. If the price of labor is $15 per hour, how many hours of labor can the firm hire if it spends nothing on machines?
2667 hours
explicit costs are
actual monetary payments for resources purchased
John moved his office from a building he was renting downtown to the carriage house he owns in back of his house. How will his costs change?
explicit costs fall; implicit costs rise
accounting profits equal
economic profit plus implicit costs
If the Money Store earns a normal profit this year, its
economic profit is 0
Which of the following is a short-run adjustment?
People's Bank hires two new tellers to meet increased demand for customer services.
The law of diminishing returns explains why
short-run MC and AVC curves are U-shaped
In the range of increasing marginal returns, total product is
increasing at an increasing rate
A variable cost is one that changes
as output changes
What is the relationship between marginal cost and marginal product?
When marginal product increases, marginal cost falls.
Which of the following is true of the MC curve?
it intersects both the ATC and the AVC curves at their minimums.
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