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Lecture 5: Cost of Production in ECON 2000

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Lecture 5: Cost of Production in ECON 2000

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Questions and Answers

What is the relationship between average fixed cost and the quantity of output?

Average fixed cost remains constant regardless of the quantity of output

Average fixed cost increases as the quantity of output increases (correct)

Average fixed cost is unrelated to the quantity of output

Average fixed cost decreases as the quantity of output increases

What characterizes a situation of diseconomies of scale?

Long-run average total cost rises as the quantity of output increases (correct)

Variable costs decrease with an increase in output

Long-run average total cost stays the same as the quantity of output changes

Long-run average total cost falls as the quantity of output increases

What is the main property of constant returns to scale?

Long-run average total cost stays the same as the quantity of output changes (correct)

Long-run average total cost rises as the quantity of output increases

Long-run average total cost is fixed regardless of the quantity of output

Long-run average total cost falls as the quantity of output increases

What does the marginal cost represent?

The increase in variable cost due to producing an extra unit Signup and view all the answers

How does economies of scale relate to long-run average total cost?

It causes long-run average total cost to fall Signup and view all the answers

What is the formula for profit for a firm?

Total Revenue - Total Cost Signup and view all the answers

Which of the following best defines Implicit Costs?

Input costs that do not require an outlay of money by the firm. Signup and view all the answers

What is Marginal Product in economics?

The increase in output that arises from an additional unit of input. Signup and view all the answers

In economics, what do Fixed Costs refer to?

Costs that do not vary with the quantity of output produced. Signup and view all the answers

What is Average Total Cost in economics?

Total Cost divided by the quantity of output. Signup and view all the answers