Exam 12: The Costs of Production

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are L = 5, Q = 125) and L = 6, Q = 152). Then the marginal product of the 6th worker is

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing constant returns to scale.

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

Suppose that for a particular business there are no implicit costs. Then

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Which of the following statements is not correct?

Average variable cost will decrease if .

Diminishing marginal productivity implies decreasing total product.

Economies of scale arise when

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?

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

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

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

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? i) shoe polish Ii) rent on the shoe stand Iii) wages Pete could earn delivering newspapers Iv) interest that Pete's money was earning before he spent his savings to set up the shoe­ Shine business

Table 13-19 -Refer to Table 13-19. What is the shape of the average-total-cost curve?

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's explicit costs are

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's profit.

Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. -Refer to Scenario 13-8. What are Wanda's total accounting profits?

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000. Which of the following statements is correct?

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