Exam 11: Technology, Production, and Costs

Table 11-8 represents the monthly output of five companies in the electric scooter manufacturing industry. Minimum efficient scale in this industry is a monthly output of 27,000 electric scooters, and the industry has a typical U-shaped long-run average cost curve with no constant returns to scale. -Refer to Table 11-8. Which of the following potential mergers would result in the new company experiencing diseconomies of scale?

Figure 11-10 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 11-10. Constant returns to scale

-Refer to Figure 11-17. Starting from point D, a movement along isoquant2 to point F

Table 11-8 represents the monthly output of five companies in the electric scooter manufacturing industry. Minimum efficient scale in this industry is a monthly output of 27,000 electric scooters, and the industry has a typical U-shaped long-run average cost curve with no constant returns to scale. -Refer to Table 11-8. Which of the following potential mergers would result in the new company achieving the minimum efficient scale?

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs for the first year?

-Refer to Table 11-4. The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan, a commercial fisherman. a. Complete the Marginal Product column in Table 11-4. b. Characterize the production function, i.e. does the production function display increasing marginal returns, diminishing marginal returns, etc. c. Using the data above, graph Juan's marginal product curve. Be sure to label the horizontal and vertical axes. Is your graph consistent with your answer to part (b)? Explain. d. Juan uses the following inputs for fishing - a small wooden boat (B), a fishing pole (P) and of course, his labor (L). Treating the boat and the fishing pole as fixed inputs and using the data above, graph Juan's Total Product of Labor curve. Be sure to label the horizontal and vertical axes. e. The opportunity cost of Juan's time is $8 per hour. If Juan receives $2 per pound for his fish, what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer. Hint: Recall marginal benefit and marginal cost analysis.

-Refer to Figure 11-12. The lines shown in the diagram are isocost lines. A movement from CE to BD occurs when

-Refer to Figure 11-12. The lines shown in the diagram are isocost lines. If the price of labor is $50 per unit, then along the isocost AF, the total cost

Table 11-8 represents the monthly output of five companies in the electric scooter manufacturing industry. Minimum efficient scale in this industry is a monthly output of 27,000 electric scooters, and the industry has a typical U-shaped long-run average cost curve with no constant returns to scale. -Refer to Table 11-8. Which of the following potential mergers would still result in the new company experiencing economies of scale?

-Refer to Figure 11-14. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

-Refer to Figure 11-15. The figure above illustrates a series of isoquants. Which of the following statements is true?

Figure 11-13 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China. -Refer to Figure 11-13. Consider the following statements: A. For each country, the marginal product per dollar spent on labor equals to the marginal product per dollar spent on capital. B. The price of labor is relatively higher in the United States than in China and the price of capital is relatively lower in the United States than in China. C. The price of labor and the price of capital are relatively higher in the United States than in China. Based on the figure, which of the statements above is true?

Due to falling sales and increased competition from online retailers like Wayfair, Pier 1 Imports announced it would be closing up to 450 stores in 2020, representing almost half of its 942 locations. Pier 1's sales fell by 13 percent in the fourth quarter of 2019, and the company reported a net loss of $59 million for the quarter. Source: "Pier 1 Imports Closing Nearly Half of Stores as Sales Falter," Associated Press, January 6. 2020 -Refer to the Article Summary. Use a graph to illustrate average total cost curves for Pier 1 before and after closing the 450 stores. Assume that after closing the stores, Pier 1 will be producing at minimum average total cost.

-Refer to Figure 11-14. What is the combination of inputs that produces 200 gooseberry pies at the lowest cost?

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

Elegant Settings manufactures stainless steel cutlery. Table 11-9 shows the company's cost data. -Refer to Table 11-9. What is the minimum efficient scale of production?

Figure 11-10 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. -Refer to Figure 11-10. For output rates greater than 20,000 picture frames per month

-Refer to Table 11-10. Clock It To Me manufactures clock radios. The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes. a. You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes. Record your calculations in the table below. b. For each of the three output levels, which plant size will generate the lowest average total cost of production? c. Suppose the firm currently sells 8,000 clock radios per period (using the optimal plant size for this output level). Now, however, it has just secured a long-term contract to supply 20,000 clock radios per period. In the short run, what is the average total cost of producing 20,000 clock radios? Provide a numerical value based on your answer in part a. d. What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.

-Refer to Figure 11-12. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the firm's total cost while the price of labor and capital remain unchanged?

-Refer to Figure 11-12. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the price of labor while the price of capital remains unchanged?