Micro. Chapter 13

Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. 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. What is the total cost associated with making 890 boxes of earrings per week? a. $1,325 b. $1,575 c. $1,400 d. $1,250

d. $1,250

Diminishing marginal product of labor occurs when adding another unit of labor 1. changes output by an amount smaller than the output added by the previous unit of labor. 2. decreases output by an amount smaller than the output added by the previous unit of labor. 3. increases output by an amount larger than the output added by 4. the previous unit of labor decreases output.

1. changes output by an amount smaller than the output added by the previous unit of labor.

Marginal cost is equal to the 1. change in average product divided by the change in output. 2. change in average total costs divided by the change in output. 3. change in total cost divided by the change in output. 4. change in total product divided by the change in output.

3. change in total cost divided by the change in output.

Average fixed cost is equal to 1. average total cost plus average variable cost. 2. fixed cost multiplied by the quantity of output produced. 3. the amount of total cost that does not change as output changes in the short run. 4. fixed cost divided by the quantity of output produced.

4. fixed cost divided by the quantity of output produced.

Which of the following is the best example of a variable cost? a. annual insurance payments for a warehouse b. monthly rent payments for a warehouse c. monthly wage payments for hired labor d. annual property tax payments for a building

c. monthly wage payments for hired labor

Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. 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. What is the marginal product of the second worker? a. 110 b. 260 c. 200 d. 300

d. 300

Average fixed costs of production graph as a U-shaped curve. will rise at a fixed rate as more is produced. remain constant. fall as long as output is increased.

fall as long as output is increased.

Which of the following costs will not change as output changes? 1. total fixed cost 2. average variable cost 3. total variable cost 4. average fixed cost 5. marginal cost

total fixed cost