Exam 7: Production and Costs

Which of the following is an explicit cost?

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth. FIGURE 7-5 -Refer to Figure 7-5. What is the total cost of producing 1500 basketballs per week, assuming the firm uses the optimal plant size?

Which of the following is most likely a variable cost for a business?

Economic profit always exceeds accounting profit.

If the short-run average total cost curve is declining, what can we conclude about the marginal cost?

If a firm experiences economies of scale, the average total cost of production increases as output expands.

What will an increase in wage rates cause in the short run?

What knowledge about opportunity costs is important to understand?

The production function describes the maximum amount of a product that a firm can produce with any combination of inputs using existing technology.

A factory producing CD players finds that its output varies with the number of workers employed each week in the following way: TABLE 7-2 -Refer to Table 7-2. What is the marginal product of the fifth worker hired?

What is the law of diminishing marginal product? What causes it?

Refer to Table 7-4. If the output equals five watches per week, what is the average fixed cost and average variable cost of production?

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth. FIGURE 7-5 -Refer to Figure 7-5. Which plant size is optimal for the firm to produce 1500 basketballs each week?

Which of the following best describes the short run?

When economies of scale exist, what can we conclude?

How are fixed costs best defined?

One would expect to observe a diminishing marginal product of labour when crowded office space reduces the productivity of new workers.

If the total cost of producing 10 units equals $90 and the average total cost of producing 11 units equals $8.75, then what is the marginal cost of the eleventh unit produced?

FIGURE 7-4 -Refer to Figure 7-4. At output level 0Q, what is total fixed cost equal to?

The table below shows how total cost varies with output in a factory producing watches. TABLE 7-4 -Refer to Table 7-4. If the output equals four watches per week, then what is the average total cost of producing a watch?