Econ 102 Ch.9 Production

The reason the marginal cost curve eventually increases as output increases for the typical firm is because of

diminishing marginal returns.

If the total cost of production increases by 10% and output increases by less than 5%, then the firm is experiencing

diseconomies of scales

Assume that you are the owner of a small bakery in your home town. Which of the following would be a variable cost of production in the short run?

Baking supplies (flour, salt, etc.)

Which factor could contribute to a firm experiencing economies of scale?

Productivity gains from more specialized labor

Accounting profit equals total revenue minus

explicit costs

Monetary payments a firm makes to pay for resources are called

explicit costs

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. What is the economic profit generated by Extreme Gaming in the first year?

$160,000

The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of $78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates it would have returned $22,000 this year. What is the sole proprietor's economic profit?

$21,000

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The implicit costs of Harvey's firm in the first year were

$60,000

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

$94

With total fixed cost of $400, a firm incurs an average total cost of $3 and average variable cost of $2.50. The amount of output produced by the firm must be

800 units

Which of the following is most likely to be a variable cost of production in the short run?

Fuel and Power Payments

When a bakery manager reports that productivity of the 15 workers at her bakery last month was 1,800 loaves per worker, she is referring to the

average product of labor.