Exam 13: The Costs of Production

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

Total revenue minus only implicit costs is called

Adam Smith used a famous example of what type of firm to illustrate economies of scale?

Table 13-11 -Refer to Table 13-11. The average fixed cost of producing 5 posters is

Scenario 13-4 Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. -Refer to Scenario 13-4. Abdul's annual implicit cost of capital is

Accounting profit is greater than or equal to economic profit.

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

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

Figure 13-3 -Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function? (i)Total output increases as the quantity of inputs increases but at a decreasing rate. (ii)Marginal product is diminishing for all levels of input usage. (iii)The slope of the production function decreases as the quantity of inputs increases.

-Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70 students, Charles's total cost curve

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

Scenario 13-20 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. -Refer to Scenario 13-20. Marginal cost will be

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?

Which of the following statements about a production function is correct for a firm that uses labor to produce output?

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

When a firm experiences diseconomies of scale,

Table 13-10 -Refer to Table 13-10. What is the marginal cost of producing 280 units of output?

The marginal product of labor can be defined as the change in

Scenario 13-22 Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another salon. -Refer to Scenario 13-22. What is the economic profit for the hair styling salon?