Exam 13: The Costs of Production

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that

Table 13-19 -Refer to Table 13-19. What is the average fixed cost of producing 430 units of output?

Table 13-2 -Refer to Table 13-2. What is the marginal product of the third worker?

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has economies of scale over the entire range of output?

Diseconomies of scale occur when a firm's

Accountants keep track of the money that flows into and out of firms.

In the long run, a factory is usually considered a fixed input.

Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i) dog shampoo (ii) rent on the storefront (iii) wages Frank could earn as a substitute elementary-school teacher (iv) interest that Frank's money was earning before he spent his savings to set up the dog­ Grooming business

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Firms may experience diseconomies of scale when

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a

Table 13-18 -Refer to Table 13-18. What is the shape of the marginal-cost curve?

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

The things that must be forgone to acquire a good are called

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Diseconomies of scale often arise because higher production levels allow specialization among workers.

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. An economist would calculate the total cost for one birdhouse to be