Exam 8: Short-Run Costs and Output Decisions

Refer to the information provided in Table 8.4 below to answer the question(s) that follow. Table 8.4 -Refer to Table 8.4. Assuming the price of capital (K) is $10 per unit and the price of labor (L) is $5 per unit, the marginal cost of producing the third unit of output is

In the short run marginal cost is positive and decreasing at output levels where total variable cost is ________ at a(n) ________ rate.

Individual firms in perfectly competitive industries decide what price to charge for their output and what quantity of output to produce.

Refer to the information provided in Figure 8.3 below to answer the question(s) that follow. Figure 8.3 -Refer to Figure 8.3. The marginal cost of the ninth basketball is

Perfectly competitive firms

The law of diminishing marginal returns results in average total cost eventually

The marginal cost curve intersects the average variable cost curve at the ________ value of the average variable cost curve.

________ is the average cost of producing each unit of output.

Refer to the information provided in Table 8.2 below to answer the question(s) that follow. Table 8.2 -Refer to Table 8.2. If Sherry produces four pairs of earrings, her average fixed costs are

Corn is produced in a perfectly competitive market. The demand for ethanol increases. This will cause the individual corn farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

In perfect competition, a firm's demand curve

The rising part of a perfectly competitive firm's ________ cost curve is the firm's short run ________ curve.

A firm will begin to experience diminishing returns at the point where

Both Stan and Kyle own potato chip factories. Stan's factory has low fixed costs and high variable costs. Kyle's factory has high fixed costs and low variable costs. Currently, each factory is producing 5,000 bags of potato chips at the same total cost. Complete the following statement with the correct answer. If each produces

Free entry implies that

The best combination of inputs at one level of production may not be best at other levels.

Which type of cost does not depend on a firm's output?

Free exit implies that

Demand for the product of an industry in perfect competition is assumed to be inelastic.

A firm will ________ at the output where marginal cost increases