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Exam 13: The Costs of Production

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Question 91

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

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ATC = AVC + AFC,so the vertical distance...

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Question 92

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Average total cost is increasing whenever

A) total cost is increasing.
B) marginal cost is increasing.
C) marginal cost is less than average total cost.
D) marginal cost is greater than average total cost.

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Question 93

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Table 13-3 -Refer to Table 13-3.If the firm can sell its output for $1 per unit,what is the profit-maximizing level of output?

Firms may experience diseconomies of scale when

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.Assume the number of machines does not change.If the factory produces at a rate of 78 chairs per hour,what is the total machine cost per day?

Diminishing marginal product exists when the total cost curve becomes horizontal as outputs increases.

When marginal cost is greater than average cost,average cost is

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 explicit cost would be the wages that a business owner pays her employees.

Average total cost is very high when a small amount of output is produced because

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

Table 13-14 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-14.Which firm is experiencing diseconomies of scale?

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice.In Tom's first year in business his total revenue equaled $150,000.Tom's explicit cost during the year totaled $85,000.What is Tom's economic profit for his first year in business?

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced.The average cost of production for each unit of output produced was $100.The price for each of the 275 units sold was $95.Total profit for Billy's Bean Bag Emporium would be

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

Which of the following statements is correct?

Eldin is a house painter.He can paint three houses per week.He is considering hiring his friend Murphy.Together,Eldin and Murphy can paint five houses per week.What is Murphy's marginal product?

Several related measures of cost can be derived from a firm's total cost.

Table 13-12 Betty's Bakery -Refer to Table 13-12.What is the marginal cost of the 4th cake at Betty's Bakery?

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor,the firm is experiencing