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Exam 13: The Costs of Production

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Question 91

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Scenario 13-3 Zach took $500,000 out of the bank and used it to start his new cookie business.The bank account pays 4 percent interest per year.During the first year of his business, Zach sold 15,000 boxes of cookies for $3 per box.Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $14,000. -Refer to Scenario 13-3.What was Zach's accounting profit for the year

A) -$455,000
B) -$56,000
C) $1000
D) $31,000

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Question 92

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When would one expect to observe diminishing marginal product of labour

A) when crowded factory space reduces the productivity of new workers
B) when workers are discouraged about the lack of help from other workers
C) when only new workers are trained in using the most productive capital
D) when union workers are told to reduce their work effort in preparation for a new round of collective bargaining talks

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Question 93

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What must be happening when marginal cost is greater than average total cost

Figure 13-3 -Refer to Figure 13-3.Which of the marginal-cost curves reflects the existence of diminishing marginal product

How would a production function that exhibits decreasing marginal product affect the shape of the total-cost curve? Explain and draw a graph.

What effect, if any, does diminishing marginal product have on the shape of the marginal-cost curve?

What does marginal cost equal

What can the marginal product of labour be defined as

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.When is this particular firm necessarily experiencing increasing marginal product

How does the average-fixed-cost curve behave

Dolores used to work as a high school teacher for $55,000 per year but quit in order to start her own catering business.To buy the necessary equipment,she withdrew $30,000 from her savings (which paid 2 percent interest per year) and borrowed $30,000 from her uncle,to whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $75,000.She asked Louis,an accountant,and Greg,an economist,to calculate her profit for her.What did they say

Suppose that three different technologies can be used to produce a special product.The following table shows the total cost related to each technology for the amount of output produced per day.A firm is considering adopting a proper technology to produce this special product.Derive the long-run average- total-cost curve to help the firm making its decision.Quantity 1 2 3 4 5 6 7 Firm 1 $30 $40 $50 $60 $75 $90 $110 Firm 2 15 25 39 56 75 96 119 Firm 3 21 29 37 50 68 106 132

What is the relationship between accounting profit and economic profit

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

What relationship does a production function measure

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

What happens when a business is operating a factory in the short run?

Because of the greater flexibility that firms have in the long run,all short-run-cost curves lie on or above the long-run curve.

XYZ Corporation produced 300 units of output but sold only 250 of the units it produced.The average cost of production for each unit of output produced was $100.Each of the 250 units sold was sold for a price of $95.What would total revenue for XYZ Corporation be

Figure 13-4 The curves in this figure reflect information about the average total cost, average fixed cost, average variable cost, and marginal cost for a firm. -Refer to Figure 13-4.Which of the curves is most likely to represent average fixed cost