Exam 13: The Costs of Production

The amount of money that a firm pays to buy inputs is called

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production.

Total revenue minus only implicit costs is called

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 economic costs will equal

Which of the following explains why long-run average cost at first decreases as output increases?

A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.

Assume Jack received all As in his classes last semester. If Jack gets all Bs in his classes this semester, his GPA may or may not fall.

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 economies of scale.

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

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

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

The average-fixed-cost curve is always declining. How does this affect the relationship between the AVC and ATC curves?

Although economists and accountants treat many costs differently, they both treat the cost of capital the same.

Table 13-19 -Refer to Table 13-19. What is the average variable cost of producing 400 units of output?

Describe how an accounting firm could experience diseconomies of scale.

The difference between accounting profit and economic profit relates to

A firm that produces and sells furniture gets to choose

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?

Which of the following statements about a production function is correct for a firm that uses labor to produce output?

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?