Chapter 8 True or False Quiz

. The value of the inputs owned and used by a firm is an explicit cost.

. The entrepreneur's opportunity cost is an implicit cost.

. Economic cost is generally lower than accounting cost.

. Accounting costs and explicit costs are the same.

. Sunk costs are not relevant to managerial decisions.

. In the short run, total cost is equal to zero when output is equal to zero.

. In the long run, total cost is equal to zero when output is equal to zero.

. Economic cost curves define the minimum economic costs of producing various levels of output.

. Total variable cost is equal to short-run total cost minus total fixed cost.

. The average fixed cost curve is U-shaped.

. The law of diminishing returns is reflected in the downward-sloping portion of the short-run marginal cost curve.

. Average total cost is equal to marginal cost where marginal cost is at a minimum.

. If the long-run average cost curve slopes upward over some range of output, then the firm is experiencing increasing returns to scale over that range of output.

. The point of inflection of the short-run total variable cost function corresponds to the level of output where marginal cost is at a minimum.

. If marginal cost is greater than average total cost, then average total cost is rising.

. The vertical distance between the short-run average total and average variable cost curves is equal to marginal cost.

. The minimum short-run average total cost occurs at a level of output that is greater than that at which average variable cost is at a minimum.

. The slope of a ray drawn from the origin to any point on a total cost curve is equal to average total cost at that point.

. If a ray that is drawn from the origin to a point on a total cost curve is tangent to the total cost curve, then its slope is equal to the minimum average total cost of production.

. The point at which the marginal product of a variable input is at a maximum corresponds to the point at which marginal cost is at a maximum.

. The level of output at which the average product of a variable input is at a maximum corresponds to the level of output where short-run average total cost is at a minimum.

. All costs are variable costs in the long run.

. The long-run total cost curve is derived from the firm's expansion path.

. The long-run average cost curve is tangent to the lowest points on all possible short-run average total cost curves.

. Long-run average cost slopes downward over a range of output where a firm experiences decreasing returns to scale.

. If long-run marginal cost is greater than long-run average cost, then the firm is experiencing decreasing returns to scale.

. Long-run marginal cost is equal to short-run marginal cost at the level of output where the corresponding short-run average total cost curve is tangent to the long-run average cost curve.

. Industries where the long-run average cost curve has a positive slope over a wide range of output are referred to as natural monopolies.

. Learning curves slope upward.

. If a learning curve is represented by C = aQb, then b > 0.

. The brain drain refers to the emigration of highly skilled workers from their home countries.

. Cost-volume-profit analysis is used to determine the profit-maximizing level of output.

. The contribution margin per unit is equal to price minus short-run average variable cost.

. Breakeven output is equal to total fixed cost divided by the contribution margin per unit.

. The degree of operating leverage is equal to the ratio of the firm's total fixed cost to total variable cost.

. An increase in operating leverage results from the substitution of fixed costs for variable costs.

. Economic theory suggests that a cubic function is an appropriate form for an empirical short-run total variable cost curve.

. The survival technique is used to estimate short-run total variable cost functions.

. Just-in-time inventory management and globalization have contributed to the emergence and growth of logistics.

. Logistics refers to the rational assessment of supply and demand by consumers.

. While it may contribute to cost savings, logistics is not a source of competitive advantage.

.

Logistics merges a firm's design and manufacturing functions into a centrally managed unit.

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