In the short run, costs associated with fixed inputs are known as ___ costs.

Fixed costs

True or False: Total variable costs remain constant regardless of output changes.

False; total variable costs change with output levels.

The total cost in the short run is the sum of ___ and ___ costs.

Fixed and variable

Short-run marginal cost is defined as the change in total cost associated with producing ___ additional unit of output.

One

Average fixed cost decreases as output ___ increases.

Increases

The U-shaped curve of average total cost is a result of the behavior of ___ and ___ costs.

Average fixed and average variable

In the long run, all inputs are ___, allowing for adjustments in production processes.

Variable

True or False: Long-run average cost curves show decreasing costs up to a certain output level before rising again.

True

The point at which average variable cost is minimized occurs when marginal cost equals ___ cost.

Average variable

In the long run, the cost of producing a higher output level can be expressed as the change in total cost per ___ of output.

Unit

The relationship between marginal cost and average cost indicates that when marginal cost is less than average cost, average cost will ___.

Decrease

Fill in the blank: Diseconomies of scale occur when the long-run average cost starts to ___ as output increases.

Rise

True or False: Economies of scale lead to increasing long-run average costs.

False; economies of scale lead to decreasing long-run average costs.

The long-run average cost curve is known as the ___ curve because it represents the lowest possible cost at each output level.

Envelope

What is the impact of specialization on long-run average costs?

Increased specialization leads to lower long-run average costs due to more efficient resource utilization.

Fill in the blank: The minimum point of the long-run marginal cost curve corresponds to the minimum point of the ___ curve.

Average total cost

The law of variable proportions explains the behavior of which type of cost in the short run?

Variable costs

True or False: Average total cost reaches its minimum before average variable cost does in the production process.

False; average variable cost reaches its minimum before average total cost.

What do fixed costs include in the context of short-run production?

Fixed costs include expenses such as rent, depreciation, and salaries of permanent staff.

Fill in the blank: The concept of ___ in production refers to the ability to adjust all inputs in the long run.

Flexibility

When output is zero, total cost consists solely of ___ costs.

Fixed

True or False: Marginal cost can never be less than average total cost.

False; marginal cost can be less than average total cost when average total cost is decreasing.

The shape of the long-run total cost curve is primarily influenced by which two factors?

Production function and factor prices

Fill in the blank: In the long run, a firm can choose different combinations of ___ to minimize costs.

Inputs

How is long-run marginal cost calculated?

Long-run marginal cost is calculated as the change in total cost divided by the change in output.

True or False: A firm experiences diseconomies of scale when managerial efficiency decreases with increased production.

True

What does the term 'break-even point' refer to in cost analysis?

The break-even point is the level of output at which total revenue equals total costs, resulting in no profit or loss.

Fill in the blank: The average variable cost curve first ___ before it starts to increase.

Declines

What is the significance of the expansion path in long-run cost analysis?

The expansion path shows the least-cost combinations of inputs for producing various levels of output.

True or False: In the long run, firms can only adjust labor but not capital.

False; firms can adjust both labor and capital in the long run.

Fill in the blank: Long-run average cost reflects the ___ cost per unit of output when all inputs are variable.

Minimum

In the short run, costs are classified into ___ and ___ costs based on their behavior with changes in output.

Fixed and variable

True or False: Average fixed cost (AFC) decreases as output increases.

True

The relationship between marginal cost (MC) and average total cost (ATC) indicates that MC intersects ATC at its ___ point.

Minimum

Fill in the blank: Long-run average cost (LAC) curves are shaped by economies and ___ of scale.

Diseconomies

What happens to average variable cost (AVC) as output increases beyond a certain point?

AVC initially decreases, reaches a minimum, and then starts to increase.

True or False: In the short run, total fixed costs can be avoided by reducing output.

False; total fixed costs must be incurred regardless of the level of output.

Explain the concept of marginal cost in relation to output changes.

Marginal cost is the change in total cost resulting from producing one additional unit of output, reflecting the cost of variable factors.