Chapter 11
technological change.
A characteristic of the long run is
being able to produce the same output using fewer inputs. being able to produce more output using the same inputs. a decline in the quantity of output that can be produced from a given quantity of inputs.
An example of technological change is
$4720
Charles has decided to open a lawn-mowing company. To do so, he purchases mowing equipment for $3000, buys gasoline ($2.20 in gas is required to mow each yard), and pays a helper $25.00 per yard. Prior to opening the lawn company, Charles earned $4 comma 000 as a lifeguard at the neighborhood swimming pool. Assume the money he used to purchase the mowing equipment could otherwise have earned 4 percent per year in the bank and that the mowing equipment depreciates at 20 percent per year. Charles plans to mow 200 yards per year. What is Charles's implicit cost... of production?
500, 660, 820, 980, 1140, 1300
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid $160 per day and the greenhouse is rented for $500 per day. Fill in total cost in the table below. (Enter your responses as integers.)
16.5, 6.83, 6.13, 6.33, 6.84
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid $160 per day and the greenhouse is rented for $500 per day. fill in average total cost in the table. (Enter your responses as real numbers rounded to two decimal places.)
120, 240, 120, 60, 30
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table. Fill in the marginal product of labor in the table below. (Enter your responses as integers.)
changes output by an amount smaller than the output added by the previous unit of labor.
Diminishing marginal product of labor occurs when adding another unit of labor
for more than 4 units of labor
Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. Refer to Figure 11-3. For what quantity of labor does production start to display diminishing returns?
The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A.
Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal product of labor and average product of labor curves in the short run. Refer to Figure 11-3. Which of the following statements correctly describes the curves in the figure?
1. A firm's technology may make it possible to increase production with a smaller proportional increase in at least one input. 2. Both workers and managers can become more specialized, enabling them to become more productive, as output expands. 3. Large firms may be able to purchase inputs at lower costs than smaller competitors. 4. As a firm expands, it may be able to borrow money less expensively, thereby lowering its costs.
Firms experience economies of scale for several reasons. What is one such reason?
MC=Upper Delta TC/Upper Delta Q Remembering that the Greek letter delta, Upper Delta, means "change in,"
How can marginal cost be expressed mathematically? Marginal cost (MC) can be expressed as
A nonmonetary opportunity cost.
Implicit cost
3, 4, 3, 2
Indicate the marginal product of each worker.
of economies and diseconomies of scale.
Long-run cost curves are U-shaped because
D
Refer to Figure 11-6. In the figure above which letter represents the average fixed cost curve?
B
Refer to Figure 11-6. In the figure above which letter represents the average total cost curve?
C
Refer to Figure 11-6. In the figure above which letter represents the average variable cost curve?
A
Refer to Figure 11-6. In the figure above which letter represents the marginal cost curve?
$2,000
Refer to Figure 11-7. When output level is 100, what is the total cost of production?
$8.
Refer to Figure 11-7. When the output level is 100 units average fixed cost is
33000, 1550
Suppose a pizza parlor has the following production costs: $2.00 in labor per pizza, $1.00 in ingredients per pizza, $0.30 in electricity per pizza, $1 comma 000 in restaurant rent per month, and $550 in insurance per month. Assume the pizza parlor produces 10 comma 000 pizzas per month. What is the variable cost of production (per month)? What is the fixed cost of production (per month)?
will decrease because your "marginal" GPA will be below your cumulative GPA.
Suppose that last semester your semester GPA was 1.70 and your resulting cumulative GPA was 2.66. Next, suppose that this semester your semester GPA will be 2.10. If so, then your cumulative GPA
to use inputs to produce outputs of goods and services
The basic activity of a firm is
C3, C2, C1, C4
The figure to the right illustrates the short-run cost curves for a company that produces cell phones. Identify the average total cost curve (ATC), the average variable cost curve (AVC), the average fixed cost curve (AFC), and the marginal cost curve (MC) in the figure.
applies only in the short run.
The law of diminishing marginal returns
Minimum efficient scale
The level of output at which all economies of scale are exhausted.
production function.
The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's
a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.
The marginal cost of production shows the change in a firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost curve? Graphically, the marginal cost curve is
the change in output that a firm produces as a result of hiring one more worker.
The marginal product of labor is defined as
technology.
The processes a firm uses to turn inputs into outputs of goods and services is called
Economies of scale
The situation when a firm's long-run average costs fall as it increases output.
Constant returns to scale
The situation when a firm's long-run average costs remain unchanged as it increases output.
Diseconomies of scale
The situation when a firm's long-run average costs rise as the firm increases output.
Short run The period of time during which at least one of a firm's inputs is fixed. Long run The period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant.
What is the difference in the short run and the long run?
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs.
What is the production function?
the processes a firm uses to turn inputs into outputs of goods and services.
What is technology?
a factory building
Which of the following is a factor of production that generally is fixed in the short run?
Walmart builds another Supercenter.
Which of the following is an example of a long-run adjustment? A) Your university offers Saturday morning classes next fall. B) Ford Motor Company lays off 2,000 assembly line workers. C) A soybean farmer turns on the irrigation system after a month long dry spell. D) Walmart builds another Supercenter.
Whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be increasing.
Which of the following is true of the relationship between the average product of labor and the marginal product of labor?
Becomes a variable cost
Your company incurs a cost for factory rent, which, in the short run, is fixed. What happens to this cost in the long run?
$640
if the total cost of producing three units of output is $2 comma 628 and the total cost of producing four units of output is $3 comma 268, then the marginal cost of the fourth unit is $____. (Enter your response as an integer.)