Exam 11: Technology, Production, and Costs

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor ,who has a store of the same size as yours, is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price, you expect to make a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Explain how the listed events (a-d)would affect the following at Hilton Hotels. i.Marginal cost ii.Average variable cost iii.Average fixed cost iv.Average total cost a.Hilton decides on an across-the-board 5 percent increase in executive salaries. b.Hilton decides to eliminate all print advertising. c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers. d.The federal government starts to levy a $5 room tax on all hotel rooms.

Figure 11-16 -Refer to Figure 11-16.The figure above illustrates a series of isoquants.Which of the following statements is true?

The change in a firm's total cost from producing one more unit of a good or service is the firm's

Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist, 12 for the second artist, and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?

As a firm moves to higher isocost lines,

Which of the following is an implicit cost of production?

As output increases, the distance between average total cost and average variable cost increases.

Figure 11-5 -Refer to Figure 11-5.The vertical difference between curves F and G measures

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker the average product of labor declines.Which of the following statements must be true?

A firm's expansion path

Figure 11-13 -Refer to Figure 11-13.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?

If marginal product is equal to average product, then total product is at a maximum.

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

The slope of an isoquant is equal to the ratio of the price of the input on the horizontal axis divided by the price of the input on the vertical axis, multiplied by -1.

Figure 11-6 Figure 11-6 contains information about the short-run cost structure of a firm. -Refer to Figure 11-6.In the figure above, which letter represents the average total cost curve?

Which of the following equations is incorrect?

What is an isocost line? What is the slope of an isocost line?

If average total cost is falling, marginal cost must also be falling.

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.