Exam 13: The Costs of Production

Samantha has been working for a law firm and earning an annual salary of $80,000.She decides to open her own practice.Her annual expenses will include $15,000 for office rent,$3,000 for equipment rental,$1,000 for supplies,$1,200 for utilities,and a $35,000 salary for a secretary/bookkeeper.Samantha will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.Assuming that there are no additional expenses,Samantha's annual implicit costs will equal

Figure 13-2 The figure below depicts a total cost function for a firm that produces cookies. -Refer to Figure 13-2.Which of the following statements best captures the nature of the underlying production function?

Scenario 13-4 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 13-4.Average fixed cost will be

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Figure 13-6 The curves below reflect information about the cost structure of a firm. -Refer to Figure 13-6.Curve A is U-shaped because of

As Al's Radiator Company adds workers while keeping the same amount of machinery,some workers may be underutilized because they have little work to do while waiting in line to use the machinery.When this occurs,Al's Radiator Company encounters

When marginal cost exceeds average total cost,

How long does it take a firm to go from the short run to the long run?

When average total cost rises if a producer either increases or decreases production,then the firm is said to be operating at efficient scale.

Some reasons that firms may experience diseconomies of scale include that

Scenario 13-3 Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat. -Refer to Scenario 13-3.Tony's accounting profit equals

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA).Johnny's cumulative GPA will fall even further next semester if he performs worse than (i) his cumulative GPA. (ii. he ever performed before. (iii) he did last semester.

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

The fundamental reason that marginal cost eventually rises as output increases is because of

Average variable cost is equal to total variable cost divided by quantity of output.

Since the 1980s,Wal-Mart stores have appeared in almost every community in America.Wal-Mart buys its goods in large quantities and,therefore,at cheaper prices.Wal-Mart also locates its stores where land prices are low,usually outside of the community business district.Many customers shop at Wal-Mart because of low prices.Local retailers,like the neighborhood drug store,often go out of business because they lose customers.This story demonstrates that

Table 13-1 -Refer to Table 13-1.What is total output when 4 workers are hired?

Table 13-7 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. -Refer to Table 13-7.What is the average fixed cost for the month if nine instructional modules are produced?

Which of the following is the best example of a variable cost?

One of the most important properties of cost curves is that