Exam 13: The Costs of Production

​Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct?

When economists speak of a firm's costs, they are usually excluding the opportunity costs.

Table 13-2 -Refer to Table 13-2. At which number of workers does diminishing marginal product begin?

Marginal cost increases as the quantity of output increases. This reflects the property of

The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.

A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.

Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her business's

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

Randy is a minor-league baseball player. His current cumulative batting average is 0.270. Randy believes that if he can raise his cumulative batting average to 0.300, he will have a chance to play in the major leagues. Which of the following statements is correct?

Scenario 13-19 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. -Refer to Scenario 13-19. Suppose the owner of the business had an offer to work for another firm for $25,000. The firm's accounting profit for the year was

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

When marginal cost is less than average total cost,

Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. -Refer to Scenario 13-5. Emily's total opportunity cost of capital is

Economies of scale arise when

Table 13-18 -Refer to Table 13-18. What is the average variable cost of producing 500 units of output?

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

Which of the following statements is correct?

Figure 1 b. Figure 2 c. Figure 3 d. Figure 4 ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.174 - Given a graph of the production function and input costs, derive the firm's total-cost curve. TOPICS: Producer theory Production function KEYWORDS: BLOOM'S: Comprehension CUSTOM ID: 178.13.3 - MC - MANK08 Figure 13-8 -Refer to Figure 13-8. Which of the following statements is correct?