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Exam 13: The Costs of Production

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Question 21

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If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

A) economies of scale.
B) diseconomies of scale.
C) coordination problems arising from the large size of the firm.
D) fixed costs greatly exceeding variable costs.

E) None of the above
F) A) and D)

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Question 22

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Table 13-19 -Refer to Table 13-19. What is the marginal product of the second worker?

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250 - 100 ...

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Question 23

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Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

The graph of the production function plots total cost versus quantity of output.

Table 13-1 -Refer to Table 13-1. What is total output when 5 workers are hired?

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog be sold for a price of $65. The Three Amigo's total costs are

How can the average-fixed-cost curve be declining when fixed cost is constant?

Table 13-3 -Refer to Table 13-3. The marginal product of the third worker is

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's economic profits are

Total revenue minus only implicit costs is called

Scenario 13-1 Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year. -Refer to Scenario 13-1. If Korie purchases the factory with her own money, what is the annual implicit opportunity cost of purchasing the factory?

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Table 13-18 -Refer to Table 13-18. What is the shape of the average-fixed-cost curve?

Describe how an accounting firm could experience economies of scale.

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's accounting profits are

The amount of money that a firm pays to buy inputs is called

Scenario 13-8 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 13-8. What are Wanda's total economic profits?

Describe the general shape of the average-fixed-cost curve.

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits