lesson 6 - 1. Explicit costs are payments to outsiders or...

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1. Explicit costs are payments to outsiders or non-owners. 2. Marginal Product is the additional output with one additional worker or the loss of output with one fewer worker. 3. Marginal cost is the additional cost of producing one more unit of output. 4. MC is a U -shaped curve due to the Law of Diminishing Returns. 5. Among the three possibilities in Figure 6.4, Plant # 2 has the lowest average cost possible. 6. Marginal product is the amount of additional product produced by one additional worker. 7. In figure 6.4 the SRAC for Plant #1 is at a minimum cost at C1 8. In figure 6.4 when the largest capacity plant is built, the minimum average cost is C3 . 9. Assume you are starting a new business that requires an investment of $20,000 but you could have invested in another endeavor for the same amount with the same risk and received a 25 percent return. You have sacrificed a $5,000 return and this is an opportunity cost of using the funds for your new business. 10. A firm’s economic costs are those payments that a firm must make in order to attract resources away from alternative uses. 11. The Law of Diminishing Returns is the basic principle that as more is produced, eventually less additional output will result with each additional input. 12. Marginal cost is a critical variable in microeconomics. ( True ) 13. The Marginal Product is the change created in total product from a change of one additional unit of input resources. 14. Economic costs are the total sacrifices that must be made to do something or acquire something. 15. Diseconomies of scale cause All the above costs to increase with increases in output due to production inefficiencies. 16. The Total Product curve is the quantity of output graphed on the Y-axis while the number of inputs is graphed on the X-axis. 17. Economic Costs include Both a. and b. 18. A manager must analyze the relationship of costs to output and make
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This note was uploaded on 06/18/2011 for the course ECON 2301 taught by Professor Newbury during the Spring '10 term at Richland Community College.

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lesson 6 - 1. Explicit costs are payments to outsiders or...

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