Exam 12: Production and Cost Analysis II

An entrepreneur is an individual who sees an opportunity to sell an item at a price higher than the average total cost of producing it.

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an economist most likely would say that:

Diseconomies of scale are associated with:

Refer to the graph shown. The cost of 5 units of labor and 6 2/3 units of machines is the same as the cost of:

Suppose a firm finds that an additional dollar spent on labor increases output more than does an additional dollar spent on machines. Under these conditions, the firm:

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

Refer to the graph shown. If the firm wishes to double output from 500 to 1,000:

An entrepreneur would be least likely to develop a product if expected average total cost is:

Which of the following is most likely an example of constant returns to scale?

The economically efficient method of production:

The long-run average total cost curve is considered to be an envelope curve as each short-run average total cost curve touches it at only one level of output.

Refer to the graph shown. The output range in region a is associated with:

At the minimum efficient level of production:

Refer to the graph shown. If a firm wants to produce 300 units of output, it should use the plant size represented by:

When carmakers began to cut the costs of producing cars by designing the chassis, engines, and transmissions so that different models could be produced on the same assembly line, production costs fell $240 per car. This idea best illustrates:

Diseconomies of scale are associated with:

To manufacture 1,000 pairs of shoes in a week, a firm can use 1,500 workers and 50 machines or 100 machines and 2,000 workers. Which method is more technically efficient?

Refer to the graph shown. A firm that shifts from SATC₁ to SATC₂ is most likely to do so because planned output increases:

When carmakers began to cut costs of producing cars by designing the chassis, engines, and transmissions so that different models could be produced on the same assembly line, production costs fell $240 per car. This change caused car makers' short-run average cost curves to:

How does the envelope relationship relate short run average cost and long run average cost?