Exam 13: The Costs of Production

Lettuce Eat, a vegetarian cafe, exhibits diminishing returns to labour.If the cost of each meal is constant and labour is the only other input, then the total cost-curve will:

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1.What is the variable cost of producing five kayaks?

During the summer Jeremy, a small business owner, can hire extra staff to help him repair boats.On his own Jeremy can repair 10 boats a day, adding a second staff member sees 15 boats a day repaired, and adding a third sees 18 boats a day repaired.The marginal product of the third worker is:

Julia runs a home construction business and owns a variety of construction equipment.She normally uses her equipment to build and sell homes herself, however when times are tough she rents out the equipment to other builders.Which of the following should Julia not include when looking at the costs of building a new home:

Graph 13-6 This graph depicts average total cost functions for a firm that produces automobiles.Use the graph to answer the following question(s). -Refer to Graph 13-6.Which curve represents the long-run average total cost?

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1.The average total cost of producing four kayaks is:

Jeremy, a small business owner, earns $50 an hour repairing boats.One afternoon he takes five hours off work to build a gazebo in his garden, spending $200 on materials.If the addition of a gazebo increases his home's value by $400, then his accounting profit will be:

The long-run average total cost curve is:

Which of these will always be the highest?

Suppose that as a firm expands and notices that its long-run average total costs are declining.The most likely explanation for this is economies of scale.

Table 13-2 Adrienne's Premium Boxing Service subcontracts with a chocolate manufacturer to box premium chocolates for their mail order catalogue business.Adrienne rents a small room for $150 a week in the downtown business district that serves as her factory.She can hire workers for $275 a week.Costs are in dollars per week. -Refer to Table 13-2.During the week of 25 April, Adrienne doesn't box any chocolates.What are her costs during the week?

Graph 13-1 This graph depicts a production function for a firm that produces cookies.Use the graph to answer the following question(s). -Refer to Graph 13-1.With regard to cookie production, the figure implies:

Economic profit is equal to:

Accounting profit is equal to:

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1.What is the variable cost of producing zero kayaks?

A sawmill processes logs into timber.Identify the costs below that are an example of a fixed cost.(i) rent paid on the factory (ii) maintenance of the trucks used for transport of logs (iii) wages of the workers

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1.The marginal cost of producing the sixth kayak is:

Table 13-3 Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. -Refer to Table 13-3.One month the firm worked overtime to produce 16 bicycles.What was the average fixed cost for that month?

Costs are a key determinate of a firm's production and pricing decisions.

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