Exam 8: Production Technology and Cost

For small quantities of output,average variable cost decreases as output increases due to:

A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal to:

When the long-run cost curve is negatively sloped the firm is experiencing diseconomies of scale.

Marginal cost is equal to:

When an increase in a firm's scale of production leads to higher average costs it is referred to as:

Which of the following is a reason why the marginal product increases as output increases:

-Refer to Figure 8.9.Which point of the LAC represents diseconomies of scale?

Table 8.5 -Refer to Table 8.5.If Sherry produces five pair of earrings,her total costs are:

How is a long-run average cost curve different from a short-run average cost curve? How are they related?

Whenever the marginal cost is less than the average cost,the average cost is falling.

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue. -Refer to Scenario 8.1.Ana's opportunity cost of running her own business is:

When an increase of a firm's scale of production leads to lower average costs per unit produced,economies of scale are present.

Which of the following describes a long-run adjustment of a firm to changing business conditions?

What are economies of scale? What are diseconomies of scale? What are constant returns to scale?

Table 8.5 -Refer to Table 8.5.If Sherry produces four pair of earrings,her average fixed costs are:

Explain why the firm's short-run marginal cost curve initially decreases and then increases in most cases.

Additional Application Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand. "Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70. -If the owners of a golf course only include their explicit costs when they calculate their annual profit:

If average variable cost decreases as output increases,then:

You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.During the year,your economic costs were:

If the first copy cost of producing a R&B music video is $350,000 and the marginal cost is $0,how much total cost would the firm incur if it produces 5 million copies?