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Exam 13: The Costs of Production

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Question 31

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Average total cost (ATC) is calculated as follows:

A) ATC = (change in total cost) /(change in quantity of output) .
B) ATC = (change in total cost) /(change in quantity of input) .
C) ATC = total cost/quantity of output.
D) ATC = total cost/quantity of input.

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Question 32

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Which of the following statements is false?

A) The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units.
B) The total variable cost of seven units equals the average variable cost of seven units times seven.
C) If marginal cost is rising, then average variable cost must be rising.
D) The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable cost of four units.

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Question 33

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The total cost curve gets steeper as output increases due to

Figure 13-8 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-8.Which curve represents the long-run average total cost?

If marginal cost is below average total cost,then average total cost

Economists normally assume that the goal of a firm is to

If the average total cost curve is falling,what is necessarily true of the marginal cost curve? If the average total cost curve is rising,what is necessarily true of the marginal cost curve?

Industrial organization is the study of how

In the long run,

Economists and accountants both include forgone income as a cost to a small business owner.

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Table 13-8 -Refer to Table 13-8.What is the variable cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

The marginal cost curve crosses the average total cost curve at

Economists normally assume that the goal of a firm is to (i) make profit as large as possible even if it means reducing output. (ii) make profit as large as possible even if it means incurring a higher total cost. (iii) make revenue as large as possible.

Marginal cost is equal to average total cost when

Scenario 13-2 Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000. -Refer to Scenario 13-2.Zach's economic profit for the year was

Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business.To buy the necessary equipment,she withdrew $20,000 from her savings,(which paid 3 percent interest) and borrowed $30,000 from her uncle,whom she pays 3 percent interest per year.Last year she paid $25,000 for ingredients and had revenue of $60,000.She asked Louis the accountant and Greg the economist to calculate her profit for her.

Table 13-8 -Refer to Table 13-8.What is the marginal cost of the 2nd gigaplot at Jimmy's Gigaplot factory?

Table 13-8 -Refer to Table 13-8.What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory?

Table 13-5 -Refer to Table 13-5.The average variable cost of producing four widgets is