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Exam 13: The Costs of Production

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Question 281

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Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has constant returns to scale over the entire range of output?

A) Firm 1
B) Firm 2
C) Firm 3
D) Firm 4

E) A) and D)
F) None of the above

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Question 282

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​Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct?

A) ​Sebastian's economic profit is $4,000, and his accounting profit is $34,600.
B) ​Sebastian's economic profit is $4,600, and his accounting profit is $35,000.
C) ​Sebastian's economic profit is -$16,000, and his accounting profit is $34,600.
D) ​Sebastian's economic profit is -$16,000, and his accounting profit is $14,600.

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

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Question 283

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A firm has a fixed cost of $200 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units?

When marginal cost is rising, average variable cost

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 8th unit of output?

Describe the general shape of the average-fixed-cost curve.

Table 13-9 -Refer to Table 13-9. The average total cost of producing 240 units is

Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. -Refer to Scenario 13-5. Emily's annual implicit cost of capital is

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

Table 13-9 -Refer to Table 13-9. The average variable cost of producing 240 units is

Table 13-3 -Refer to Table 13-3. At which number of workers does diminishing marginal product begin?

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

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

Table 13-13 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. -Refer to Table 13-13. What is the average fixed cost for the month if 9 instructional modules are produced?

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 total-cost curve is

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero.

For a firm, the relationship between the quantity of inputs and quantity of output is called the

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA) . Johnny's cumulative GPA will be better next semester if he (i) performs better than he did last semester. (ii) performs better than his cumulative GPA. (iii) gives an average performance.

Scenario 13-19 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. -Refer to Scenario 13-19. In producing the 7,000 pounds of cheese, the firm's average variable cost was

The average-fixed-cost curve