Chapter 12: The Costs of Production

_________ _________ are those that remain the same regardless of how much is produced.

fixed costs

_________ _______ are those that depend on the level of production.

variable costs

The overarching goal of the majority of firms is _________.

profit

________ ______ is the amount that a firm receives from the sale of goods and services.

total revenue

_________ ______ is the amount that a firm pays for all the inputs that go into producing goods or services.

total cost

Profit= total ________ - total _________

revenue, cost

The two types of costs are _______ costs and _________ costs.

fixed, variable

_______ __________are those that don't depend on the quantity of output produced.

fixed costs

Fixed costs can be _____ ______ only or _________.

one time, ongoing

__________ _________ depend on the quantity of output produced.

variable costs

If a firm stops production then its ________ cost will be zero but its _________ costs will still be there.

variable, fixed

Total cost is made up of ______ costs and _________ costs.

variable, fixed

A firms opportunity cost is made up of _______ and _______ costs.

explicit, implicit

_______ ________ are those requiring a firm to spend money.

explicit costs

______ _______ represent forgone opportunities. (Ex: opportunities that could have made the firm money had they invested another way).

implicit costs

______________ ________= total revenue - explicit costs

accounting profit

__________ ______= total revenue - explicit costs - implicit costs

economic profit

A ________ _______ expresses the relationship between the quantity of inputs and the quantity of outputs.

production function

The marginal _______ is the additional ________ generated by an additional unit of input.

product, output

Diminishing _________ ___________ is a principle stating that the marginal product of an input _________ as the quantity of the input ____________

marginal product, decrease, increases

Total costs= _____ ______ + _________ ________

fixed costs, variable costs

Average fixed cost= ________ ______/ _________

fixed cost, quantity

Average Variable Cost= _______ _______/ __________

variable cost, quantity

Average Total Cost = _______ ________/ _________

total cost, quantity

Doubling _______ does not necessarily mean doubling _________.

inputs, outputs

On a production function graph, the curve will get steeper as marginal product _________.

increases

On a production function graph, the curve will flatten as marginal product _______.

diminishes

_______ ________ is represented by the slope of the total production curve.

marginal product

Average product= _________ _________/ # of _________

total production, workers

When a new employees marginal product is greater than the existing ________ ________, the average __________.

average product, increases

When a new workers marginal product is less than the existing _______ _________, the average ________.

average product, falls

Increasing marginal cost correlates with ________ marginal ______.

diminishing, product

When we graph average fixed cost, the curve trends __________. This is because fixed costs remain _________ as quantity produced _________, so the fixed cost per unit of production ________.

downward, constant, increases, decreases

When we graph average variable cost it is ___-________. It initially slopes ______ as the first few employees will have an ________ marginal product. When _______ product kicks in, it then slopes upward.

u-shaped, downward, increasing, diminishing.

When we graph average total cost, it is ____-________.

u-shaped

When the marginal cost of producing another unit of output is less than the average total ________, producing that extra unit will _________ the average total cost.

cost, decrease

Returns to scale describes the relationship between the _______ ____ ______ and ________ ________ ______.

quantity of output, average total cost

Economies of scale are returns that occur when an ________ in the quantity of _____ decreases _____ ________ ______.

increase, output, average total cost

Diseconomies of scale are when an increase in the quantity of __________ __________ average total cost.

increase, output, increases

Constant returns to scale are when ____ ______ _______ does not depend on the _______ ___ ______.

average total cost, quantity of output