Exam 12: The Costs of Production

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Average variable cost is equal to total variable cost divided by quantity of output.

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Total cost is the

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

Scenario 13-9 Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. -Refer to Scenario 13-9. Ellie's annual implicit costs will equal

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. What is the marginal product of the second worker?

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Table 13-3 -Refer to Table 13-3. The marginal product of the third worker is

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Figure 13-1 -Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP2 to TP1?

An entrepreneur's motivation to start a business arises from

Table 13-18 -Refer to Table 13-18. What is the shape of the average-total-cost curve?

Scenario 13-14 If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. -Refer to Scenario 13-14. Farmer Brown's total­cost curve is

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

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 economic profit for the hair styling salon?