Chapter 7

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.

economies of agglomeration; corresponding diseconomies

The graph above illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's

decreasing marginal costs.

______________ include all of the costs of production that increase with the quantity produced.

Variable costs

If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits or losses equal?

losses equal $15

Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct?

A = 20; E = 5

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

35%

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

$1.00

In economics, a firm that faces no competitors is referred to as _________________.

a monopoly

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

$2.43

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are _______________

upward-sloping; more costly to produce

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost

A situation where the level of output, scale and average costs are all rising is called

both a and b are correct

The economies-of-scale curve is a long-run average cost curve because

it allows all factors of production to change.

If this information were used to create a total cost graph, the curve should

reflect all of the above.

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

either total cost or variable cost

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

constant returns to scale

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?

costs of research and development

The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?

A = 42, E = 12

Economies of scale may arise from all but one of the following. Which one is it?

government economic subsidies protect firms from competition to avoid losses.

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

Agglomeration factors

The term _____________ is used to describe the additional cost of producing one more unit.

marginal cost

The graph above illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph?

as the point where the total cost curve touches the vertical axis

Fixed costs are important because, at least in the ___________, the firm _______________.

short run; cannot alter them

In the US economy, nearly half of all the workers employed by private firms work at

18,000 large firms that employ more than 500 workers.