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Exam 13: The Costs of Production

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Question 41

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If a firm increases its output by one unit, the amount by which its costs increase by is called:

A) marginal cost
B) average cost
C) marginal product
D) variable cost

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Question 42

Multiple Choice

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In reference to setting the production level, a firm's cost curves:

A) dictate what decisions the firm will make
B) have no bearing on what decisions the firm will make
C) by themselves do not tell us what decisions the firm will make
D) none of the above are true

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Question 43

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Accounting profit is equal to:

Table 13-3 Consider the following firm which makes high-performance racing bicycles. All costs are given in dollars. Output is shown on a monthly basis. The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. -Refer to Table 13-3. What is the average variable cost for the month if six bicycles are produced?

The marginal cost curve crosses the average total cost curve at:

Graph 13-2 This graph depicts a total cost function for a firm that produces cookies. Use the graph to answer the following question(s) . -Refer to Graph 13-2. The changing slope of the total cost curve reflects:

As a starting point, economists assume that firms are organised to: (i) maximise their sales (ii) maximise their profit (iii) minimise their tax

Graph 13-5 The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s) . -Refer to Graph 13-5. This particular firm is necessarily experiencing increasing marginal product when curve:

The marginal cost curve can rise even if the average total cost is falling.

Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. The average total cost of producing 4 kayaks is:

Implicit costs that do not require a money outlay are typically ignored by economists.

Graph 13-5 The set of curves above reflect information about the cost structure of a firm. Use this graph to answer the following question(s) . -Refer to Graph 13-5. Which of the curves is most likely to represent average variable cost?

In the long run there are no fixed inputs.

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

The use of specialisation to achieve economies of scale is one reason modern societies are as prosperous as they are.

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.

Graph 13-6 This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s) . -Refer to Graph 13-6. At levels of output above point N, the firm experiences:

Economic profit is equal to:

Explain why the long-run average total cost curve has a U-shape.

In the long run: