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Exam 7: Technology , Production and Costs

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Question 21

Multiple Choice

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-Refer to Table 7-1. What is the marginal product of the 4th worker?

A) 137 pounds
B) 50 pounds
C) 12.5 pounds
D) 5 pounds

E) B) and D)
F) All of the above

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Question 22

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If the firm is producing no output in the short run, then its total costs are zero.

A) True
B) False

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Question 23

Multiple Choice

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-Refer to Table 7-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The average product of labour will equal 60 boxes when Manny hires

A curve that shows all the combinations of two inputs, such as labour and capital, that will produce the same level of output is called

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50, this is evidence of

Over the past twenty years, the number of small family farms has fallen significantly, and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

An avocado orchard employs five full-time workers. Currently, the average product of labour is 120 pounds of avocados per day. The orchard hires a 6th full-time worker and his marginal product is 150 pounds of avocados. The average product of the six workers will now be

-Refer to Figure 7-17. A curve that connects points a, d and e is called

-Refer to Figure 7-5. The vertical difference between curves F and G measures

In the long run

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business. To save money, she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10 000 per year. She also invested her $20 000 savings (which earned a market interest rate of 5% per year) in her business. You are given the following information about the first year of her operations. Total revenue $120 000 Cost of labour 40 000 Cost of materials 15 000 Equipment rental 5000 a. Calculate her economic costs. b. Calculate her accounting costs. c. Calculate her implicit costs. d. Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?

If fixed costs do not change, then marginal cost

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

One reason why, in the short run, the marginal product of labour might increase initially as more workers are hired is that

Which of the following equations is incorrect?

Accounting costs exclude implicit costs.

If average total cost is falling, marginal cost must also be falling.

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.