Exam 12: The Costs of Production

There is general agreement among economists that the long-run time period exceeds one year.

Accounting profit is equal to

Suppose that a firm's long­run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing

Figure 13-3 -Refer to Figure 13-3. Which of the following is true of the production function not pictured) that underlies this total cost function? i) Total output increases as the quantity of inputs increases but at a decreasing rate. Ii) Marginal product is diminishing for all levels of input usage. Iii) The slope of the production function decreases as the quantity of inputs increases.

Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

Which of the following is an example of an implicit cost?

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. Ziva's accountant would calculate the total cost of farming to equal

Economies of scale occur when a firm's

Describe the difference between the short run and the long run.

Variable costs equal fixed costs when nothing is produced.

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical

A production function is a relationship between inputs and

Figure 13-3 -Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function not pictured)?

The production function depicts a relationship between which two variables? Also, draw a production function that exhibits diminishing marginal product.

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

Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her business's

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 35 chairs per hour, what is the total labor cost per hour?

Economists normally assume that the goal of a firm is to earn i) profits as large as possible, even if it means reducing output. Ii) profits as large as possible, even if it means incurring a higher total cost. Iii) revenues as large as possible, even if it reduces profits.

Table 13-19 -Refer to Table 13-19. What is the shape of this firm's total­cost curve?

Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. What is Christine's annual opportunity cost of the financial capital that she invested in her business?