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Exam 13: The Costs of Production

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Question 1

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Economies of scale occur when a firm's

A) marginal costs are constant as output increases.
B) long-run average total costs are decreasing as output increases.
C) long-run average total costs are increasing as output increases.
D) marginal costs are equal to average total costs for all levels of output.

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Question 2

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Figure 13-1 -Refer to Figure 13-1.Suppose the production function shifts from TP2 to TP1.Such a shift in the total product curve is most likely due to a decrease in the firm's

A) costs of production.
B) product price.
C) market share.
D) productivity.

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Question 3

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Scenario 13-7 Wanda owns a lemonade stand.She produces lemonade using five inputs: water,sugar,lemons,paper cups,and labor.Her costs per glass are as follows: 0.01 dinar for water,0.02 dinar for sugar,0.03 dinar for lemons,0.02 dinar for cups,and 0.10 dinar for the opportunity cost of her labor.She can sell 300 glasses for 0.50 dinar each. -Refer to Scenario 13-7.What are Wanda's implicit costs per glass?

The amount of money that a firm pays to buy inputs is called

Thirsty Thelma owns and operates a small lemonade stand.When Thelma is producing a low quantity of lemonade she has few workers and her equipment is not being fully utilized.Because she can easily put her idle resources to use,

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.This firm experiences diseconomies of scale at what output levels?

Table 13-8 $\begin{array} { | c | l | l | } \hline \begin{array} { c } \text { Quantity } \\\text { of Output }\end{array} & \begin{array} { l } \text { Fixed } \\\text { Cost } \\\text { (dinar) }\end{array} & \begin{array} { l } \text { Variable } \\\text { Cost (dinar) }\end{array} \\\hline 0 & 20 & 0 \\\hline 1 & 20 & 10 \\\hline 2 & 20 & 40 \\\hline 3 & 20 & 80 \\\hline 4 & 20 & 130 \\\hline 5 & 20 & 200 \\\hline 6 & 20 & 300 \\\hline\end{array}$ -Refer to Table 13-8.What is the average variable cost of producing 5 units of output?

Refer to Table 13-2.At which number of workers does diminishing marginal product begin?

Table 13-13 $\begin{array} { | c | c | } \hline \text { Output } & \text { Total Cost (dolars) } \\\hline 0 & \$ 40 \\\hline 10 & \$ 60 \\\hline 20 & \$ 90 \\\hline 30 & \$ 130 \\\hline 40 & \$ 180 \\\hline 50 & \$ 240 \\\hline\end{array}$ -Refer to Table 13-13.What is the total fixed cost for this firm?

Figure 13-1 -Refer to Figure 13-1.Which of the following could explain why the total product curve would shift from TP2 to TP1?

When a firm's only variable input is labor,then the slope of the production function measures the

The long-run average total cost curve is always

A production function describes

Figure 13-5 -Refer to Figure 13-5.Curve D is increasing because

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

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

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

Marginal cost increases as the quantity of output increases.This reflects the property of

Consider the following information about bread production at Beth's Bakery: $\begin{array} { | c | c | } \hline \text { Worker } & \text { Marginal Product } \\\hline 1 & 5 \\\hline 2 & 7 \\\hline 3 & 10 \\\hline 4 & 11 \\\hline 5 & 8 \\\hline 6 & 6 \\\hline 7 & 4 \\\hline\end{array}$ Beth pays all her workers the same wage,and labor is her only variable cost.From this information we can conclude that Beth's marginal cost

In the long run Firm A incurs total costs of $900 when output is 30 units and $1,200 when output is 40 units.Firm A exhibits