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Exam 13: The Costs of Production

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Question 251

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Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

A) 7,000 pounds
B) 3,500 pounds
C) 3,000 pounds
D) 1,000 pounds

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Question 252

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In the short run, if a firm produces nothing, total costs are zero.

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Question 253

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Table 13-6 Wooden Chair Factory -Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

Economists normally assume that the goal of a firm is to (i) earn profits as large as possible, even if it means reducing output. (ii) earn revenues as large as possible, even if it means reducing profits. (iii) minimize costs, regardless of profits.

Table 13-14 -Refer to Table 13-14. What is the average fixed cost of producing 8 units of output?

Marginal cost is equal to average total cost when

Tony's Taco Truck has average variable costs of $1 and average fixed costs of $2 when it produces 50 units of output (tacos) . The truck's total cost at 50 units of output is

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?

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

Can economic profit ever exceed accounting profit?

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Describe the relationship between average total cost and marginal cost.

Scenario 13-9 Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. -Refer to Scenario 13-9. According to an economist, which of the following revenue totals will yield Ellie's business $50,000 in economic profits?

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

Economic profit is equal to total revenue minus the

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At levels of output between M and N, the firm experiences

The amount by which total cost rises when the firm produces one additional unit of output is called

If the marginal-cost curve is rising, then so is the average-total-cost curve.

Economies of scale occur when

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?