Exam 13: The Costs of Production

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

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

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves?

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?

Table 13-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-16. Which firm is experiencing diseconomies of scale?

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.

An example of an explicit cost would be the wages that a business owner pays her employees.

Scenario 13-12 Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. -Refer to Scenario 13-12. Ariana's accounting profit for the year was

Table 13-18 -Refer to Table 13-18. What is the total output of five workers?

Scenario 13-22 Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another salon. -Refer to Scenario 13-22. What is the economic profit for the hair styling salon?

A second or third worker may have a higher marginal product than the first worker in certain circumstances.

Table 13-19 -Refer to Table 13-19. What is the total output of five workers?

The nature of a firm's cost (fixed or variable) depends on the

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

Accountants often ignore implicit costs.

The field of industrial organization addresses how the number of firms affects prices in a market and the efficiency of the market outcome.

Suppose that a firm's long­run average total costs of producing hand­crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

Economists assume that the typical person who starts her own business does so with the intention of