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Exam 13: The Costs of Production

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Question 161

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Which of the following is not a property of a firm's cost curves?

A) Marginal cost must eventually rise as a result of diminishing marginal product.
B) Average total cost is U-shaped.
C) Economies of scale will exist when average total cost falls as output rises.
D) Average total cost will cross marginal cost at the minimum of marginal cost.

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Question 162

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The fundamental reason that marginal cost eventually rises as output increases is because of

A) economies of scale.
B) diseconomies of scale.
C) diminishing marginal product.
D) rising average fixed cost.

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Question 163

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Bob Edwards owns a bagel shop.Bob hires an economist who assesses the shape of the bagel shop's average total cost (ATC)curve as a function of the number of bagels produced.The results indicate a U-shaped average total cost curve.Bob's economist explains that ATC is U-shaped for two reasons.The first is the existence of diminishing marginal product,which causes it to rise.What would be the second reason? Assume that the marginal cost curve is linear.(Hint: The second reason relates to average fixed cost)

When economists speak of a firm's costs,they are usually excluding the opportunity costs.

When comparing short-run average total cost with long-run average total cost at a given level of output,

A local potato chip company plans to operate out of its current factory,which is estimated to last 25 years.All cost decisions it makes during the 25-year period

Implicit costs

Economists normally assume that the goal of a firm is to

A firm has a fixed cost of $500 in its first year of operation.When the firm produces 100 units of output,its total costs are $4,500.The marginal cost of producing the 101st unit of output is $300.What is the total cost of producing 101 units?

Scenario 13-6 A certain firm produces and sells staplers.Last year,it produced 7,000 staplers and sold each stapler for $6.In producing the 7,000 staplers,it incurred variable costs of $28,000 and a total cost of $45,000. -Refer to Scenario 13-6.In producing the 7,000 staplers,the firm's average variable cost was

Jennifer is a junior in college.Her current cumulative grade point average (GPA) is 3.5 out of a 4.0 scale.Jennifer is hoping that by the time she graduates,she can raise her cumulative GPA to a 3.7.Which of the following statements is correct?

Table 13-6 -Refer to Table 13-6.What is the average fixed cost of producing 5 units of output?

Table 13-6 -Refer to Table 13-6.What is the average variable cost of producing 5 units of output?

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Gordon is a senior majoring in computer network development at Smart State University.While he has been attending college,Gordon started a computer consulting business to help senior citizens set up their network connections and teach them how to use e-mail.Gordon charges $25 per hour for his consulting services.Gordon also works 5 hours a week for the Economics Department to maintain that department's Web page.The Economics Department pays Gordon $20 per hour.From this information we can conclude:

Suppose Jan started up a small lemonade stand business last month.Variable costs for Jan's lemonade stand now include the cost of

Table 13-4 Gallo Cork Factory -Refer to Table 13-4.Each worker at Gallo's cork factory costs $12 per hour.The cost of each machine is $20 per day regardless of the number of corks produced.If Gallo's produces at a rate of 35 corks per hour,what is the total labor cost per hour?

The marginal product of any input is the

Figure 13-4 -Refer to Figure 13-4.Curve A represents which type of cost curve?

Figure 13-6 -Refer to Figure 13-6.Which of the figures represents the total cost curve for a firm?