Exam 13: The Costs of Production

Profit is defined as

Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

A production function is a relationship between inputs and

Diminishing marginal productivity implies decreasing total product.

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. The implicit cost for one birdhouse is

Figure 13-4 -Refer to Figure 13-4. Which of the above marginal cost curves reflects diminishing marginal product?

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. -Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. -Refer to Scenario 13-10. An accountant would calculate the total profit for one photo frame to be

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

Diseconomies of scale occur when

Scenario 13-12 Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. -Refer to Scenario 13-12. Ariana's accounting profit for the year was

Average total cost is increasing whenever

Accountants keep track of the money that flows into and out of firms.

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Figure 13-10 -Refer to Figure 13-10. The firm experiences economies of scale if it changes its level of output from

Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

Table 13-2 -Refer to Table 13-2. What is the marginal product of the first worker?

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 70 chairs per hour and operates 8 hours per day, what is the factory's total labor cost per day?

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing constant returns to scale.