Exam 13: The Costs of Production

Economists normally assume that the goal of a firm is to earn (i) profits as large as possible, even if it means reducing output. (ii) profits as large as possible, even if it means incurring a higher total cost. (iii) revenues as large as possible, even if it reduces profits.

Suppose that for a particular business there are no implicit costs. Then

Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are

Scenario 13-2 Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year. -Refer to Scenario 13-2. Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Chelsea's annual opportunity cost of purchasing the factory?

The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. Each tree sells for a price of $65. The Carolina Christmas Tree Corporation's total revenues are

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. Charles's math tutoring company experiences diminishing marginal productivity with the addition of the

A total-cost curve shows the relationship between the

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

Table 13-3 -Refer to Table 13-3. At which number of workers does diminishing marginal product begin?

When calculating a firm's profit, an economist will subtract only

Scenario 13-3 Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Kachina $20 per hour. -Refer to Scenario 13-3. If Kachina can work additional hours at either job, what is the opportunity cost if she spends one hour reading a novel?

Table 13-19 -Refer to Table 13-19. What is the average variable cost of producing 400 units of output?

Table 13-18 -Refer to Table 13-18. What is the average total cost of producing 525 units of output?

Table 13-19 -Refer to Table 13-19. What is the marginal product of the sixth worker?

Consider a small hair styling salon. List some examples of implicit costs of this business.

Figure 13-1 -Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP1 to TP2?

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing constant returns to scale.

Scenario 13-15 Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and seeds are her only cost. -Refer to Scenario 13-15. Joan's production function exhibits

A difference between explicit and implicit costs is that