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Exam 12: The Costs of Production

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Question 61

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Which of the following statements is correct?

A) Opportunity costs equal explicit minus implicit costs.
B) Economists consider opportunity costs to be included in a firm's total revenues.
C) Economists consider opportunity costs to be included in a firm's costs of production.
D) All of the above are correct.

E) C) and D)
F) A) and B)

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Question 62

True/False

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If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

A) True
B) False

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Question 63

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Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm C is experiencing economies of scale.

Scenario 13-15 Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and seeds are her only cost. -Refer to Scenario 13-15. Joan's total­cost curve is

Table 13-18 -Refer to Table 13-18. What is the average fixed cost of producing 450 units of output?

Table 13-5 -Refer to Table 13-5. The marginal product of the third worker is

The marginal-cost curve intersects the average-fixed-cost curve at the minimum of marginal cost.

Accountants often ignore implicit costs.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is$20 per day regardless of the number of chairs produced. Assume the number of machines does not change. If the factory produces at a rate of 78 chairs per hour, what is the total machine cost per day?

In setting the production level, a firm's cost curves

Economists in the field of industrial organization study how

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. -Refer to Scenario 13-10. An economist would calculate the total cost for one photo frame to be

Table 13-19 -Refer to Table 13-19. What is the marginal product of the sixth worker?

What might cause diseconomies of scale?

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 0 to 45 students, Charles's total cost curve

Suppose that a firm's long­run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing

Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical production function. Based on its shape, what does the corresponding total cost curve look like?

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's economic profits are

Economists assume that the typical person who starts her own business does so with the intention of