Exam 7: Production and Costs

The period of time that is too short for the firm to change the quantity of certain resources used in production, known as fixed inputs, is called the short run.

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

TABLE 7-1 -Refer to Table 7-1. With which additional picker does the marginal product of labour begin to diminish?

You operate a factory that produces beach towels. Your current level of output equals 2000 towels per week. Your weekly variable cost equals $8000. If your total cost each week equals $9000, what is the average total cost of production per towel?

FIGURE 7-2 -Refer to Figure 7-2. The diagram above shows two cost curves representing short-run total cost and total fixed cost. Which letter represents the total cost curve and the total fixed cost curve?

Which of the following is NOT a variable cost of production?

You operate a factory that produces beach towels. Your current level of output equals 2000 towels per week. Your weekly variable cost equals $8000. If your total cost each week equals $9000, what can you conclude about the fixed costs of production?

FIGURE 7-3 -Refer to Figure 7-3. Which is the short-run average total cost curve?

Explain why some costs are considered to be variable and some fixed. How does time enter into the definition?

Which of the following statements best describes costs in the long run?

When marginal cost exceeds the average variable cost, average variable cost must be increasing.

What is the impact on firms if opportunity costs are ignored?

What is an important and often ignored opportunity cost?

Why is the short run NOT the same length of time for all firms and industries?

When marginal cost is increasing, average total cost must be increasing.

What is the definition of the marginal cost of a good?

What is the term for the change in total cost resulting from a one-unit increase in production?

What is the definition of marginal product of labour?

A factory producing motorcycle helmets employs six workers. At the current production level, each worker produces 20 helmets per week. Assuming that labour is the only variable input and that the weekly wage equals $600 per week, what is the average variable cost per helmet?

There are two types of costs associated with production. Which of the following statements best describes the monetary payment associated with these costs?