Econ Exam 3 - CH 11

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

$700

Refer to Table 11-3. What is the variable cost of production when the firm produces 115 lanterns?

$1,157

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?

$120

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

$145

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

$2.40

Refer to Table 11-3. What is the marginal cost per unit of production when the firm produces 100 lanterns?

$32

Refer to Figure 11-2. The curve labeled "E" is

the marginal product curve

Refer to Figure 11-2. The average product of labor declines after L2 because

the marginal product of labor is below the average product of labor.

If production displays economies of scale, the long-run average cost curve is

downward sloping

Economic costs of production differ from accounting costs in that

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Long-run cost curves are U-shaped because

economies and diseconomies of scale

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

economies of scale

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?

economies of scale in farming

If fixed costs do not change, then marginal cost

equals the change in variable cost divided by the change in output.

As a firm hires more labor in the short run, the

extra output of another worker may rise at first, but eventually must fall.

Average fixed costs of production

fall as long as output is increased.

A firm has successfully adopted a positive technological change when

it can produce more output using the same inputs.

Improvements in inventory control represent a positive technological change because they allow firms to produce the same output with fewer inputs. In recent years, many firms have adopted an inventory system in which firms accept shipments from suppliers as close as possible to the time they will be needed. Wal-Mart has been a pioneer in using inventory control systems to this in its stores. This type of inventory system is called a ________ inventory system.

just in time

Which of the following is a fixed cost?

payment to hire a security worker to guard the gate to the factory around the clock

The law of diminishing marginal returns states

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

The long-run average cost curve shows

the lowest average cost of producing every level of output in the long run.

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

2 chairs

Refer to Table 11-1. Diminishing marginal returns sets in when the ________ worker is hired.

3rd

Refer to Table 11-1. What is the marginal product of the 4th worker?

5 pounds

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

5 units

Which of the following equations is correct?

AFC + AVC = ATC

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Average cost will fall.

Refer to Figure 11-4. Identify the curves in the diagram.

E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

Refer to Figure 11-5. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production?

In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote, what must be true of the plant's average cost of production curve?

It is upward sloping

The formula for total fixed cost is

TFC = TC - TVC

Which of the following is a factor of production that generally is fixed in the short run?

a factory building

Which of the following is an example of market "production", as used by economist?

The theatre and film studies department in Fine Art's College stages a play at the local theatre.

Which of the following is the best example of a short run adjustment?

Your local Wal-Mart hires two more associates.

The explicit cost of production is also called

accounting cost

Refer to Figure 11-2. Diminishing returns to labor set in

after L1

A characteristic of the long run is

all inputs can be varied

The minimum efficient scale is

level of operation where long-run average costs are lowest.

In the short run, if marginal product is at its maximum, then

marginal cost is at its minimum

Which of the following is an implicit cost of production?

rent that could have been earned on a building owned and used by the firm

If we have information about workers' marginal products, then total and average product can be found by

summing the marginal values to find the total and dividing it by the number of workers to get the average.

The difference between technology and technological change is that

technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.

The marginal product of labor is defined as

the additional output that results when one more worker is hired, holding all other resources constant.

In the short run, marginal product of labor increases at first and then falls because

there are fewer opportunities for division of labor and specialization when fewer workers are hired.