Production and Cost Relationships in Economics Quiz

A fixed cost in economics is one that remains constant regardless of the level of production, such as rent for factory space.

Explicit costs are tangible, monetary expenses, while implicit costs represent the opportunity costs associated with non-monetary sacrifices.

The short run in economics refers to a time period during which certain inputs, like plant and equipment, remain fixed.

Diseconomies of scale refer to the situation where average total cost increases as production levels rise.

The production function in economics is used to analyze and understand the relationship between input factors and the resulting outputs.

Average Variable Cost is calculated by dividing the Total Variable Cost by the quantity of output.

Economies of scale describe the cost advantage that arises when production increases, leading to a decrease in average total cost.

In the short run, the U-shaped average total cost curve is influenced by variable costs.

In the long run, total cost is equal to total variable cost as all costs become variable.

Variable costs in production vary with the level of output, and the cost of raw materials is a classic example.

In the long run, fixed costs do not change with variations in production and remain constant.

At the point where average variable cost is minimized, marginal cost equals average variable cost.

Opportunity cost refers to the value of the next best alternative foregone when a decision is made.

The law of diminishing marginal returns states that as a firm increases production, the marginal returns initially rise but eventually decline.

Accounting profit considers only explicit costs, while economic profit includes both explicit and implicit costs.

At the minimum point of average total cost, marginal cost equals average total cost.

Explicit costs involve direct monetary expenses, whereas implicit costs are non-monetary and related to opportunity sacrifices.