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Accounting Profits

equal to the difference between total revenues and explicit cost

When economic profits in an industry are zero and implicit cost are greater than zero

accounting profits will be greater than zero

If a firms revenues just cover all its opportunity cost, then

economic profit is zero

an industry is expected to expand if firms in the industry are earning

economic profit

Economic profit is

total revenues minus the opportunity cost of the inputs

Suppose a firms sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which of the following is true

The firm may earn accounting profits , but will face economic losses

Normal profits are

considered an implicit cost by economist

Implicit cost are

"payments" for the self employed resources

Economic profits for a company is defined as the total revenues of the firm minus the

opportunity cost of all resources

In the short run, output

can vary as the result of using a fixed amount of plant and equipment more or less intensively

The main difference between the short run and the long run is that

in the short run, one or more is fixed

Which of the statements is false

The short run refers to the same time period for all industries

In the short run

outputs can be change by using different levels of variable inputs

According to the law of diminishing marginal returns, eventually

the additional outputs generated by additional units of an input will diminish

Which of the following relationships will NOT result from the diminishing marginal returns

diseconomies of scale

Which of the following is true

Underlying the law of diminishing returns is the assumption that at least one input remains fixed

Diminishing returns are observed as a firm increases production by adding variable to at least one fixed input because

as more variable inputs are hired, the amounts of the fixed inputs per variable input they have to work with decreases

The law of diminishing returns implies

eventually, the more hours you spend studying per day, the less you will learn with an added hour

A professional bowler knows that practicing four hours a day will allow her to play better than if she practices three hours a day. Yet she does not practice that fourth hour. From this we can conclude that

that added benefit to her of the additional hour of practice is less than the added cost

The law of diminishing returns only applies in cases where

there is at least one fixed factor of production

In the short run, total product begins to decrease at the point where the

marginal products of labor is zero

When the total product curve is falling, the

marginal product of labor is negative

The range of diminishing marginal productivity begins when

marginal product reaches its maximum

Over the range of positive, but diminishing, marginal returns for an inputs, the total product curve

rises at a decreasing rate

When the average variable cost if an inputs exceeds the marginal cost, assuming the quantities of all other inputs are fixed, the average product

of that inputs is less than the marginal product

At the "Amarillo piano company", the average products of labor equals 5, regardless of how much labor is used. We can say that

That marginal product of labor is 5 regardless of how many workers are hired

At what point does marginal product equal average product

where marginal product is equal to its minimum value

When marginal product reaches its maximum, what can be said of total product

total product is increasing if marginal product is positive

At the point where diminishing marginal returns to a factor of production set in

the marginal product starts to decrease

The marginal product of a factor if production is measured by

the marginal product curve approaches the average product curve from above.

GO TO NUMBER 37 to do table (test bank) (next 5 questions)


There are increasing marginal returns through the

second unit of variable input

Diminishing returns set in with the addition of the

third unit of input

There are negative marginal returns when the

ninth unit is added

With the addition of the first unit of input, the marginal product

5 and average product is 5.0

When the marginal product is zero , then total product is


At what point in the graph below does the law of diminishing returns set in (see question 42)

Point B

Which of the following properly depicts the relationship TP, AP and MP? (see question 43)

Graph D

At which point is marginal product smallest? (see question 44

Point D

In the following product schedule , marginal product will be zero for which level of input?

Point D

Variable cost are

Cost that change with the level of production

Fixed cost are those cost which are

independent of the rate of output

Which of the following is not a fixed cost

a worker's wage of $15 per hour

Which of the following is the best example of a fixed cost of production to a firm

depreciation of capital

The level of fixed cost of production for a firm

is independent of the level of output in the short run

The next 5 question refer ti the following table


The total variable cost of producing 5 units is


The average total cost of producing 3 units of output is


The average fixed cost for producing 3 units of output is


The marginal cost of producing the sixth unit of output is


If you know that when a firm produces 10 units of output , total cos


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