Exam 12: The Costs of Production

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. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?

Scenario 13-21 Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations. -Refer to Scenario 13-21. What is the economic profit for the family farm?

The marginal product of an input in the production process is the increase in

The shape of the total-cost curve is unrelated to the shape of the production function.

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 costs.

Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her hours worked labor) and a computer capital). In the short run, Christine most likely considers

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?

Marginal costs are costs that do not vary with the quantity of output produced.

The economic field of industrial organization examines how firms' decisions about prices and quantities depend on the market conditions they face.

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a

Total revenue equals

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Firm 4's efficient scale occurs at what quantity?

Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be

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 explicit costs per glass?

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

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. The explicit cost for one birdhouse is

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

The difference between accounting profit and economic profit relates to