Exam 12: The Costs of Production

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

An example of an opportunity cost that is also an implicit cost is

Economists assume that the goal of the firm is to maximize total

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

Table 13-18 -Refer to Table 13-18. What is the average variable cost of producing 500 units of output?

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. An economist would calculate Ziva's total cost of farming to equal

Frank owns a dog-grooming business. Which of the following costs would be implicit costs? i) dog shampoo Ii) rent on the storefront Iii) wages Frank could earn as a substitute elementary-school teacher Iv) interest that Frank's money was earning before he spent his savings to set up the dog­ Grooming business

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

What effect, if any, does diminishing marginal product have on the shape of the marginal cost curve?

When average total cost is above marginal cost, average total cost is rising.

Suppose that a firm's long­run average total costs of producing hand­crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

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

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 accounting profit for the family farm?

Figure 13-3 -Refer to Figure 13-3. The changing slope of the total cost curve reflects

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. Atul can bottle and sell three cases per week. What is the maximum total output possible if Riva hires Atul?

The graph of the production function plots total cost versus quantity of output.

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

For a firm, the production function represents the relationship between

Adam Smith used a famous example of what type of firm to illustrate economies of scale?