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Exam 11: Technology, Production, and Costs

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Question 141

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State the law of diminishing returns.How do diminishing returns differ from diseconomies of scale? Be sure to define diseconomies of scale in your answer.

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The law of diminishing returns states th...

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Question 142

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Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the average total cost curve?

A) A
B) B
C) C
D) D

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Question 143

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At the minimum efficient scale

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output, what is the marginal product of the 12th worker?

Assume that you observe the long-run average cost curve of ACME Bookstores, a national chain.Starting from the point on the curve where output is zero and moving to the right, which of the following lists the behavior of long-run average costs in the correct sequence (that is, which will be observed first, second, etc.) ?

When a firm produces 50,000 units of output, its total cost equals $6.5 million.When it increases its production to 70,000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

The long run refers to a time period

Which of the following costs will not change as output changes?

An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.

Which of the following is an example of a long-run adjustment?

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

Table 11-3 -Refer to Table 11-3.The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes.The capital used to produce the boxes is fixed.Diminishing returns to labor are first observed in this example after Manny hires the ________ worker.

Table 11-9 -Refer to Table 11-9.Clock It To Me manufactures clock radios.The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes. a.You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes.Record your calculations in the table below. Average Cost of Production b.For each of the three output levels, which plant size will generate the lowest average total cost of production? c.Suppose the firm currently sells 8,000 clock radios per period (using the optimal plant size for this output level).Now, however, it has just secured a long-term contract to supply 20,000 clock radios per period.In the short run, what is the average total cost of producing 20,000 clock radios? Provide a numerical value based on your answer in part a. d.What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.

The change in a firm's total cost from producing one more unit of a good or service is the firm's

Two stores - Lazy Guys and Ralph's Recliners - are located in the same city.Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same.Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production.Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes.These costs are sometimes called ________ costs.

The basic activity of a firm is

Figure 11-6 Figure 11-6 contains information about the short run cost structure of a firm. -Refer to Figure 11-6.In the figure above which letter represents the average fixed cost curve?

Which of the following statements is false?

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is