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Exam 13: The Costs of Production

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Question 121

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Figure 13-3 -Refer to Figure 13-3.The changing slope of the total cost curve reflects

A) decreasing average variable cost.
B) decreasing average total cost.
C) decreasing marginal product.
D) increasing fixed cost.

E) A) and B)
F) A) and C)

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Question 122

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Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

A) True
B) False

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Question 123

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Economies of scale often arise because higher production levels allow specialization among workers.

Scenario 13-6 A certain firm produces and sells staplers.Last year,it produced 7,000 staplers and sold each stapler for $6.In producing the 7,000 staplers,it incurred variable costs of $28,000 and a total cost of $45,000. -Refer to Scenario 13-6.In producing the 7,000 staplers,the firm's average fixed cost was

Diseconomies of scale often arise because higher production levels allow specialization among workers.

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Gavin has decided to start his own snow removal business.To purchase the necessary equipment,Gavin withdrew $2,000 from his savings account,which was earning 3% interest,and borrowed an additional $4,000 from the bank at an interest rate of 7%.What is Gavin's annual opportunity cost of the financial capital that has been invested in the business?

How long does it take a firm to go from the short run to the long run?

Which of the following statements is not correct?

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that when the firm hires 2 workers,the total cost of production is $100.When the firm hires 3 workers,the total cost of production is $120.In addition,assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired.What is the firm's fixed cost?

Assume Jack received all A's in his classes last semester.If Jack gets all B's in his classes this semester,his GPA may or may not fall.

Marginal cost equals

Figure 13-4 -Refer to Figure 13-4.Which of the curves is most likely to represent average fixed cost?

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Table 13-9 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts.The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. -Refer to Table 13-9.What is the marginal cost of creating the tenth instructional module in a given month?

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that when four units of output are produced,the total cost is $175,and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

Table 13-7 -Refer to Table 13-7.What is the variable cost of producing five widgets?

Profit equals total revenue minus total cost.

Which of the following explains why long-run average cost at first decreases as output increases?

Scenario 13-4 Wanda owns a lemonade stand.She produces lemonade using five inputs: water,sugar,lemons,paper cups,and labor.Her costs per glass are as follows: $0.01 for water,$0.02 for sugar,$0.03 for lemons,$0.02 for cups,and $0.10 for the opportunity cost of her labor.She can sell 300 glasses for $0.50 each. -Refer to Scenario 13-4.What are Wanda's total costs per glass?