ECON 705 - Module 3 Exam Questions with Verified Solutions Latest Update 2025 (Already Passed)
Law of Diminishing Marginal Returns - Answers as more of a variable resource is added to a given
amount of other resources, marginal product eventually declines and could become negative; can't
change capital & labor at the same time
Total Fixed Cost (TFC) - Answers Costs that do not vary as output varies and that must be paid even if
output is zero
Total Variable Cost (TVC) - Answers the total of all costs that vary with output in the short run
total cost - Answers - fixed costs plus variable costs
- the only cost that will ALWAYS increase
ATC & AVC Graph - Answers Generally have a u-shape on a graph
AFC - Answers goes downward and continues to decrease
profit maximization - Answers MR=MC
economic cost - Answers - the payment that must be made to obtain and retain the services of a
resource
- will break even when econ profit is 0
- implicit
- opportunity cost
accounting cost - Answers - the direct cost of operating a business, including costs for raw materials
- explicit
marginal cost - Answers the cost of producing one more unit of a good
MC intersects - Answers ATC and AVC at lowest points
Marginalism - Answers the evaluation of the usefulness of adding one more item in the production of a
product or service
MC = - Answers change in TC/change in Q
TR = - Answers P x Q
MR = - Answers change in TR/change in Q
Law of Diminishing Marginal Returns - Answers as more of a variable resource is added to a given
amount of other resources, marginal product eventually declines and could become negative; can't
change capital & labor at the same time
Total Fixed Cost (TFC) - Answers Costs that do not vary as output varies and that must be paid even if
output is zero
Total Variable Cost (TVC) - Answers the total of all costs that vary with output in the short run
total cost - Answers - fixed costs plus variable costs
- the only cost that will ALWAYS increase
ATC & AVC Graph - Answers Generally have a u-shape on a graph
AFC - Answers goes downward and continues to decrease
profit maximization - Answers MR=MC
economic cost - Answers - the payment that must be made to obtain and retain the services of a
resource
- will break even when econ profit is 0
- implicit
- opportunity cost
accounting cost - Answers - the direct cost of operating a business, including costs for raw materials
- explicit
marginal cost - Answers the cost of producing one more unit of a good
MC intersects - Answers ATC and AVC at lowest points
Marginalism - Answers the evaluation of the usefulness of adding one more item in the production of a
product or service
MC = - Answers change in TC/change in Q
TR = - Answers P x Q
MR = - Answers change in TR/change in Q
