Economic Costs and Production Theory Quiz

Economic costs encompass both explicit (monetary) and implicit (opportunity) costs.

Total cost is a valid economic cost; this statement is false.

The production function illustrates how input quantity influences output quantity.

Money is not a factor of production; it is a medium of exchange.

Rent for factory space is a fixed input, as it does not change with production levels in the short run.

In economics, 'marginal' denotes the extra change from a one-unit increase in an activity.

The law of diminishing returns asserts that adding more of a variable input to a fixed input leads to decreasing marginal productivity.

When marginal cost is below average total cost, it pulls average total cost down.

Average Variable Cost is computed by dividing Total Variable Cost by the Quantity of Output.

Economies of scale occur when long-run average total cost drops with an increase in production.

Total variable costs are alterable in the short run, distinguishing them from fixed costs.

Accounting costs focus solely on measurable expenses, while economic costs consider both measurable and opportunity costs.

An implicit cost involves sacrificing a monetary benefit, such as foregone salary in self-employment.

The relationship between marginal cost and average variable cost can involve being equal, rising, or falling.

Short-run decision-making considers total fixed costs, total variable costs, and opportunity costs.