ECON 1000 Lecture Notes - Lecture 8: Sunk Costs, Marginal Cost, Marginal Product

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29 Aug 2016

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Short run quantities of some resources are fixed; other resources are variable: fixed resources are called the firms plant (ie technology, buildings, capital, variable resources usually labour, short-run decisions are easily reversed. Long run quantities of all resources are variable: sunk cost past cost of buying a new plant. ~ firms decisions depend only on short-run cost of changing labour input and long-run cost of changing plant. ~ sunk costs are irrelevant to firm"s current decisions: long-run decisions are not easily reversed. Maximum attainable output with fixed quantity of capital as the quantity of labor varies. Tp resulting from a one-unit increase in variable input. Tp divided by the quantity of labour employed. Marginal product increases initially but eventually decreases. Average product increases initially but eventually decreases. Law of diminishing returns: with given quantity of fixed inputs, as firm uses more variable input, its mp eventually diminishes.

Related Questions

1. Theoretically, in a long-run cost function:

a. all inputs are fixed

b. all inputs are considered variable

c. some inputs are always fixed

d. capital and labor are always combined in fixed proportions

2. The short-run cost function is:

a. where all inputs to the production process are variable

b. relevant to decisions in which one or more inputs to the production process are fixed

c. not relevant to optimal pricing and production output decisions

d. crucial in making optimal investment decisions in new production facilities

3. Break-even analysis usually assumes all of the following except:

a. in the short run, there is no distinction between variable and fixed costs.

b. revenue and cost curves are straight-lines throughout the analysis.

c. there appears to be perfect competition since the price is considered to remain the same regardless of quantity

d. the straight-line cost curve implies that marginal cost is constant.

maroonllama628

The distribution of family income is preferable than the distribution of household income because

Select one:

a. household income is less accurate.

b. more households than families.

c. a household can be a single person living alone.

d. a family must be composed of at least two people.

e. family size varies less among the quantiles.

Which of the following statements is false?

Select one:

a. The long-run average-total-cost curve does not connect the minimum points of each of the short-run average-total-cost curves.

b. The long-run average-total-cost curve shows the minimum cost of producing each level of output when all resources are variable.

c. The short-run average-total-cost curve shows the minimum costs of producing each level of output when at least one input is fixed.

d. If short-run average-total-costs are declining, then economies of scale exist.

e. None of the above.

4. A firm's short-run production function describes how the

A. Maximum possible output varies as the quantity of labor hired varies in a given factory.

B. Minimum possible output varies as the quanity of labor hired varies in given factory.

C. Maximum possible output varies as a firm enlarges the size of its factory.

D. Minimum possible output varies as a firm enlarges the size of its factory.

5. For U.S. Steel, the total product curve represents the

A. maximum amount of steel attinable for each quanity of variable input hired.

B. Minimum amount of Steel attinable for each quanity of variable input hired.

C. Lowest cost of producing various amounts of steel.

D. Maximum profit when producing and selling various amounts of steel.

6. Kaiser Aluminums total product Curve will shift upward if the firm

A. Hires additonal quanities of labor and materials.

B. Pays lower wages to accuire additonal workers.

C. employs more efficient technologies in aluminum production

D. Initiates work rules leading to falling productivity of labor.

7. Margianl cost is defined as

A. total fixed costs plus total variable cost.

B. Total cost divided bt the level of output.

C. The increase in total cost as a frim produces an additonal unit of output.

D. Total cost minus total fixed cost.

8. The range over which marginal cost is decreasing is the same range over which

A. Total product is Increasing.

B. Marginal product is Increasing.

C. Total cost is increasing at an increasing rate.

D.total cost is decreasing.

9. General motors will realize diseconomics of scale if an increase in plant size causes.

A. A decrease in a long-run average total cost.

B. An increase in long-run average cost.

C. The short -run total product curve to shift upward.

D. The short-run total product curve to remain constant.

10. For Boeing, thechnological advances in the production of jetliners will tend to shift the total product and marginal product curves

A. Downward, and total cost and marginal cost curves upward.

B. Upward, and total cost and marginal cost curves downward.

C. Upward, and no change in total cost and marginal cost curves.

D. Downward, and no change in total cost and margial cost curves.

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ECON 1000 Lecture Notes - Lecture 8: Sunk Costs, Marginal Cost, Marginal Product

ECON 1000 Full Course Notes

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