Exam 11: Technology, production, and Costs

Assume that you observe the long-run average cost curve of ACME Bookstores,a national chain.Starting from the point on the curve where output is zero and moving to the right which of the following lists the behavior of long-run average costs in the correct sequence (that is,which will be observed first,second,etc.)?

Diseconomies of scale occur when

When a firm experiences a positive technological change

As output increases,the distance between average total cost and average variable cost increases.

All of the following cost curves are U-shaped except one.Which curve is not U-shaped?

Two stores - Lazy Guys and Ralph's Recliners - are located in the same city.Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size,so that the fixed costs of production for both stores are the same.Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production.Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

Which of the following is true at the output level where average total cost is at its minimum?

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase,its isocost line

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

Which of the following are implicit costs for a typical firm?

Figure 11-3 Figure 11-3 shows the cost structure for a firm. -Refer to Figure 11-3.When output level is 100,what is the total cost of production?

Table 11-4 -Refer to Table 11-4.Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business.Suzette rents space for her factory for $400 a week in a nearby strip mall.She can hire temporary workers for $200 a week.Table 11-4 above shows her output and cost data.Use the table to answer questions a-e. a.Complete the table. b.In the last week of summer Suzette closes her business to go on a family vacation.What are her costs during that week? c.In one week Suzette exactly breaks even.If her revenue for the week is $1,200,how many boxes of fruit and nuts did she produce? d.Judging from the marginal product of labor data,would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer. e.Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months.If she expects the trend in the marginal product of labor will continue in the same direction,what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

Which of the following is not a reason why firms experience economies of scale?

Table 11-5 Elegant Settings manufactures stainless steel cutlery.Table 11-5 shows the company's cost data. -Refer to Table 11-5.What is the minimum efficient scale of production?

If production displays increasing marginal returns,then

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours,asking his current employees to work more hours,or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

The total output produced by a firm divided by the quantity of workers employed by the firm is the definition of

Table 11-5 Elegant Settings manufactures stainless steel cutlery.Table 11-5 shows the company's cost data. -Refer to Table 11-5.Elegant Settings experiences

Sally quit her job as an auto mechanic earning $50,000 per year to start her own business.To save money she operates her business out of a small building she owns which,until she started her own business,she had rented out for $10,000 per year.She also invested her $20,000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations. Total revenue $120,000 Cost of labor 40,000 Cost of materials 15,000 Equipment rental 5,000 a.Calculate her economic costs. b.Calculate her accounting costs. c.Calculate her implicit costs. d.Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it will cost me $10,000 a year to rent near town." Do you agree with her reasoning?