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Exam 6: Technology,production and Costs

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Question 121

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Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.

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Question 122

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If a firm experiences diminishing returns,its marginal product must be negative.

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Question 123

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Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain. __________________________________________________________________________________________________________________________________________________________________________________________

Which of the following is true if production displays increasing marginal returns?

If the firm is producing no output in the short run,then its total costs are zero.

Figure 6.4 -Refer to Figure 6.4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

A firm has successfully adopted a positive technological change when _________.

Table 6.8 $\begin{array} { | c | c | } \hline \text { Quantity (sets) } & \begin{array} { c } \text { Long Run } \\\text { Average Cost } \\\text { (dollars) }\end{array} \\\hline 100 & 40 \\\hline 200 & 35 \\\hline 300 & 30 \\\hline 400 & 30 \\\hline 500 & 35 \\\hline\end{array}$ Elegant Settings manufactures stainless steel cutlery. Table 6.8 shows the company's cost data. -Refer to Table 6.8.The minimum efficient scale of production is _________.

Is it possible for technological change to be negative? If so,give an example. __________________________________________________________________________________________________________________________________________________________________________________________

What is the difference between technology and technological change?

Table 6.4 $\begin{array} { | c | c | c | } \hline \text { Labour (hours) } & \begin{array} { c } \text { Quantity of } \\\text { Fish (metrics) }\end{array} & \begin{array} { c } \text { Marginal Product } \\\text { (metrics) }\end{array} \\\hline 1 & 10 & \\\hline 2 & 18 & \\\hline 3 & 24 & \\\hline 4 & 28 & \\\hline 5 & 30 & \\\hline 6 & 32 & \\\hline\end{array}$ -Refer to Table 6.4.The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan,a commercial fisherman. a.Complete the Marginal Product column in Table 6.4. b.Characterise the production function,that is,does the production function display increasing marginal returns,diminishing marginal returns,etc. c.Using the data above,graph Juan's marginal product curve.Be sure to label the horizontal and vertical axes.Is your graph consistent with your answer to part (b)? Explain. d.Juan uses the following inputs for fishing-a small wooden boat (B),a fishing pole (P)and of course,his labour (L).Treating the boat and the fishing pole as fixed inputs and using the data above,graph Juan's Total Product of labour curve.Be sure to label the horizontal and vertical axes. e.(Extra Credit)The opportunity cost of Juan's time is $8 per hour.If Juan receives $2 per metric for his fish,what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer.Hint: Recall marginal benefit and marginal cost analysis. __________________________________________________________________________________________________________________________________________________________________________________________

Explain how the listed events (a-d)would affect the following at Hilton Hotels. i.Marginal cost ii.Average variable cost iii.Average fixed cost iv.Average total cost a.Hilton decides on an across-the-board 5 per cent increase in executive salaries. b.Hilton decides to eliminate all print advertising. c.Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers. d.The federal government starts to levy a $5 room tax on all hotel rooms. __________________________________________________________________________________________________________________________________________________________________________________________

Table 6.7 $\begin{array} { | c | c | c | c | c | } \hline \begin{array} { c } \text { Quantity of } \\\text { Lanterns }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Average } \\\text { Total Cost } \\\text { (dollars) }\end{array} \\\hline 75 & 200 & 170 & 370 & 4.93 \\\hline 80 & 200 & 230 & 430 & 5.36 \\\hline 90 & 200 & & & 7.67 \\\hline 100 & 200 & 810 & & \\\hline 115 & 200 & & & 11.8 \\\hline 117 & 200 & 1264 & 1464 & 12.5 \\\hline 120 & 200 & 1480 & & \\\hline\end{array}$ Table 6.7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 6.7.The average total variable cost per unit of production when the firm produces 90 lanterns is _________.

If the long-run average total cost curve is downward-sloping,then the firm is experiencing decreasing returns to scale.

Which of the following can a firm do in the long run but not in the short run?

When the average total cost is $16 and the total cost is $800,how many units is the firm producing?

The long run refers to a time period _________.

Table 6.1 $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Workers }\end{array} & \begin{array} { c } \text { Mushrooms per } \\\text { Day (metrics) }\end{array} \\\hline 1 & 12 \\\hline 2 & 30 \\\hline 3 & 45 \\\hline 4 & 50 \\\hline 5 & 54 \\\hline 6 & 56 \\\hline\end{array}$ Table 6.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 6.1.The average product of labour when the farm hires 5 workers is ________.

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1 000 routers each month,but to exhaust economies of scale in its industry,ABC would have to sell 3 000 routers each month.Therefore,_________.

If fixed costs do not change,then marginal cost _________.