Exam 12: The Costs of Production

Scenario 13-6 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. -Refer to Scenario 13-6. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting lettuce?

Tsintah weaves traditional Navaho rugs. She weaves and sells 50 rugs. Her average cost of production per rug is $50. She sells each rug for a price of $65. Tsintah's total revenues are

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

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

A firm that produces and sells furniture gets to choose

Suppose that a "doggie day care" firm uses only two inputs: hourly workers labor) and a building capital). In the short run, the firm most likely considers

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?

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

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

Economies of scale occur when

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. Which of the following statements is correct?

When a factory is operating in the short run,

Scenario 13-4 Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. -Refer to Scenario 13-4. Abdul's implicit cost of capital is

If a firm produces nothing, it still incurs its fixed costs.

When comparing short-run average total cost with long-run average total cost at a given level of output,

Firms may experience diseconomies of scale when

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 accounting profit for the hair styling salon?

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 often arise because higher production levels allow specialization among workers.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?