Exam 8: Production Costs

Use the figure Long-Run Average Total Cost Curve for Magma Motors. If this firm is currently producing 11,000 cars per year, what does it experience if it increases output by 1,000 cars? ​ Figure: Long-Run Average Total Cost Curve for Magma Motors

The total cost curve and variable cost curve are:

Use the table Workers and Buns Produced. If the manager wants to maximize total output, how many workers should be hired? ​

Roger makes short films. After he rents his film equipment for $20,000, he cannot change that decision. It costs him $5,000 per film for editing, location expenses, and other expenses incurred for each film. What is average total cost if he produces 10 films?

The amount spent on something that cannot be changed is a _____ cost.

Use the table Workers and Buns Produced. How many buns are produced when seven workers are hired? ​

The cost, on average, of producing a good is its average _____ cost.

Use the table The Cost of Swing Sets. Eleanor's costs of producing swing sets are given in this table, but the labels for several columns are missing. What column represents Eleanor's marginal costs?

When Eliza produces 20 dog treats, the marginal cost of producing the 20th dog treat is $1, and the average total cost of producing 20 dog treats is $1.25. Based on this information, the quantity where marginal cost intersects the average total cost curve is:

A firm has _____ when it is able to spread fixed costs over a greater quantity of output if it increases output, but it has _____ when output increases long-run average total costs.

Burgin's Broilers spent $2 million developing a new breed of chicken that tastes like alligator. However, it turns out that consumers don't care for chicken that tastes like alligator, and sales are poor. Which of the following should NOT factor into the firm's decision making?

Reed's Accounting Firm has 100 workers and 90 computers and currently serves 200 households. If Reed adds another accountant to his staff, he can serve 220 households. What does the law of diminishing marginal returns predict if he adds two more accountants?

Each year, a bicycle repair shop receives $120,000 in total revenue. Annual costs include $40,000 for labor, $5,000 in parts, and $30,000 in equipment rental. The owner of the bicycle repair shop owns the building and could rent it out for $12,000 per year. She could be making $50,000 per year if she worked as a project manager instead. What is the owner's economic profit?

Before long, when you add an additional worker to a firm, the next one won't contribute as much as the previous one. This statement reflects the idea of:

The cost of a unit of capital is the:

When an expense, such as rent, can be spread over many units of production, then:

Why does marginal cost increase as more is produced?

Use the figure Short-Run Graph. The curve labeled A represents the _____ curve. ​ Figure: Short-Run Graph

What do firms seek to maximize?

What best describes the short run?