Chapter 11 Technology, Production, Costs

supply curves are upward sloping because ___________

marginal cost increases as firms increase the quantity of a good they supply

basic activity of a firm

use inputs to supply outputs

technology

the processes used to turn inputs into outputs

technological change

when a firm can produce a different number of outputs using the same amount or fewer inputs

examples of positive technological change

changing layouts, hiring more skilled workers

examples of negative technological change

hiring less skilled workers, damage to machinery

turnover

when a firm sells out all of its inventory

stockouts

sales being lost because products the consumer wants are not on the shelf

in the _________________ at least one of the firms inputs is fixed

short run

in the ___________ all inputs are variable

long run

total cost

cost of all inputs the firm uses to produce its outputs

variable change

the costs that change as output changes

fixed cost

cost that remain constant as output changes

typical variable costs

electric bill, labor costs, raw materials cost

typical fixed costs

lease payments for property, insurance costs,

total cost formula

TC= VC + FC

opportunity cost

highest value alternative that must be given up to engage in an activity

explicit cost

a cost that requires actual money

implicit cost

a nonmonetary opportunity cost

economic depreciation

the cost of a good at the time of purchase minus what it is worth now

explicit costs are sometimes called ________________

accounting costs

economic costs

include both implicit and explicit costs

the relationship between the inputs a firm uses and the maximum amount of outputs it can produce with that amount of inputs

production function

average total cost

total cost divided by the quantity of output produced

marginal product of labor

additional output a firm produces as a result of hiring one more worker

law of diminishing returns

at some point, adding more variables inputs into a fixed labor will eventually stop producing as many more outputs

average product of labor

total output produced by a firm divided by the number of workers

whenever the marginal product of labor is greater than the average product of labor _________________

the average product of labor must be increasing

marginal cost

the change in a firms total cost from producing one more unit of a good or service

marginal cost formula

MC= Total cost / quantity

when the marginal product of labor is rising _________________

the marginal cost of output is falling

when the marginal product of labor is falling _________

the marginal cost of output is rising

when marginal cost is above average ___________

average total cost will rise and vice versa

in the long run, all costs are ___________

variable

there are no _______________ in the long run

fixed costs

long run average cost curve

a curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed

economies of scale

the situation when a firms long run average costs falls as it increases the quantity of output it produces

constant returns to scale

the situation where average cost of input will stay the same when the quantity produced increases

minimum efficient scale

the lowest average cost you can currently produce (lowest point on chart)

diseconomies of scale

the situation in which a firms long run average costs rise as it increases input

Which of the following are sometimes called accounting costs?

explicit

curve 2

Based on the relationship between average total cost and marginal cost, which of the curves appears to be average total cost?

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?

oppurtunity cost

What is the name for the additional output that a firm produces as a result of hiring one more worker?

marginal product of labor

20,000 units

According to the graph, which level of output represents the minimum efficient scale in bookselling?

curve b

Which graph is representative of a typical average total cost curve?

Minimum efficient scale is the level of output at which:

all economies of scale have been exhausted

in the short-run, the cost that is independent of the amount of output produced is called __________.

fixed cost

diminishing returns

According to the graph, which of the following is more likely to occur when moving from point A to point B?

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?

as part of fixed cost

Which of these costs are affected by the level of output produced?

variable costs

foregone salary and forgone interest

According to the table, which of the following are implicit costs?

When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:

increasing

The relationship between the inputs used by the firm and the maximum output it can produce is known as the:

production function

from 1,000 to 20,000

According to the graph, which change in output represents economies of scale in bookselling?

bookstores that sell over 80,000

According to the graph, what size bookstore is more likely to experience diseconomies of scale?

In the short-run, the cost that is independent of the amount of output produced is called __________.

fixed cost

When graphing a conventional short-run production function, we place __________ on the horizontal axis and __________ on the vertical axis.

the variable input, output

The short run is a period of time where __________ while the long run is a period of time where __________.

at least one input is fixed, all inputs are variable

The downward sloping part of the long run average total cost curve is where the firm is achieving:

economies of scale

output increases at an increasing rate

What is occurring from the origin up until point A in this graph?

from 20,000 to 40,000

According to the graph, over what range of output do we find constant returns to scale in bookselling?

$43.33

According to the data in the table, what is the marginal cost of producing the 640th pizza?

$5.00

According to the table, what is the average total cost of producing 550 pizzas?

curve 2

Based on the relationship between marginal and average product, which curve appears to be the average product curve?