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Exam 13: The Costs of Production

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Question 91

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The average total cost when 5 units of output are produced is $30,and the marginal cost of the sixth unit of output is $60.What is the average total cost when six units are produced?

A) $10
B) $25
C) $30
D) $35

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Question 92

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To an economist,it is conceivable that the objective that motivates an individual entrepreneur to start a business arises from

A) an innate love for the type of business that he or she starts.
B) a desire to earn a profit.
C) an altruistic desire to provide the world with a good product.
D) All of the above are correct.

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Question 93

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In some cases,specialization allows larger factories to produce goods at a lower average cost than smaller factories.

Figure 13-9 -Refer to Figure 13-9.The firm experiences diseconomies of scale if it changes its level of output

Accountants keep track of the money that flows into and out of firms.

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

For Firm A,when four units of output are produced,the total cost is $175 and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

The shape of the total cost curve is unrelated to the shape of the production function.

Table 13-6 Adrian's Premium Chocolates produces boxes of chocolates for its mail order catalogue business. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs. -Refer to Table 13-6.Adrian has received an order for 3,000 boxes of chocolates for next week.If she expects that the trend in the marginal product of labor will continue in the same direction,it is most likely that her best decision will be to

When calculating a firm's profit,an economist

The minimum points of the average variable cost and average total cost curves occur where

According to the mathematical laws that govern the relationship between average total cost and marginal cost,where must these two curves intersect?

Figure 13-6 The curves below reflect information about the cost structure of a firm. -Refer to Figure 13-6.Which of the curves is most likely to represent average fixed cost?

Economists normally assume that the goal of a firm is to (i) sell as much of their product as possible. (ii) set the price of their product as high as possible. (iii) maximize profit.

Scenario 13-3 Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat. -Refer to Scenario 13-3.What is the total opportunity cost of the day that Farmer Tony incurred for his spring day in the field planting wheat?

Figure 13-8 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-8.At levels of output below M the firm experiences

Scenario 13-1 Joe wants to start his own business. The business he wants to start will require that he purchase a factory that costs $400,000. Joe currently has $500,000 in the bank earning 3 percent interest per year. -Refer to Scenario 13-1.If Joe purchases the factory with his own money,what is the annual implicit opportunity cost of purchasing the factory?

Which of the following expressions is correct?

Table 13-3 -Refer to Table 13-3.Assume Gallo's currently employs 2 workers.What is the marginal product of labor when Gallo's adds a 3rd worker?

Marginal cost equals