Exam 11: The Firm: Production and Costs

Exhibit 11-3 A factory producing CD players finds that its output varies with the number of workers employed each week in the following way: Refer to Exhibit 11-3.The marginal product of the fifth worker hired is:

The marginal cost curve:

An implicit cost:

Exhibit 11-9 Refer to Exhibit 11-9.What is the level of the firm's total fixed cost (in thousands)?

An example of an implicit cost of production is:

A firm which owns its own equipment and is earning positive economic profits

Exhibit 11-7 Refer to Exhibit 11-7.At output level 0Q,total cost equals:

Economists define the long run as any production time period lasting over one year.

Scarlett recently began running her husband's lumber mill.Last month she took in $5,000 in sales revenue and paid $3,400 in out-of-pocket costs.Did the lumberyard make an economic profit last month?

A firm replaces a machine by hiring 3 hourly production workers instead.

Fixed costs are best defined as:

Exhibit 11-6 Refer to Exhibit 11-6.The short-run average total cost curve is the curve labeled:

The marginal product of capital:

During the short-run period of the production process,a firm is:

A Texas oil woman would like to increase the oil produced from her oil fields.Since it takes over a year to drill new wells,she opts instead for increasing labor and other variable inputs to produce more oil from existing wells.She is making a short-run production decision.

What is the law of diminishing marginal product? What causes it?

The law of diminishing marginal product provides an explanation for why average total cost eventually increases as output is expanded in the short run.

Exhibit 11-2 Refer to Exhibit 11-2.How much are total fixed costs (in dollars)?

In the short run,some costs are fixed.

Average fixed cost: