Exam 13: The Costs of Production

Figure 13-1 -Refer to Figure 13-1. Suppose the production function shifts from TP2 to TP1. Such a shift in the total product curve is most likely due to a decrease in the firm's

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

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

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At output levels greater than N, the firm experiences

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. What is the marginal product of the second worker?

Table 13-5 -Refer to Table 13-5. Assume that fixed costs are $500, and variable costs are $100 per worker. For this firm, what are the shapes of the production function and the total-cost curve?

Consider a small family wheat farm. List some examples of explicit costs of farming.

When a firm is experiencing diseconomies of scale, long-run

The total cost to the firm of producing zero units of output is

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

Scenario 13-14 If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. -Refer to Scenario 13-14. Farmer Brown's production function exhibits

Patrice owns a travel agency. Her accountant most likely includes which of the following costs on her financial statements?

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

The average-fixed-cost curve is always declining. How does this affect the relationship between the AVC and ATC curves?

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical total cost curve. Based on its shape, what does the corresponding production function look like?

Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve.