Chapter 11- Technology, Production, and Costs
According to the graph, which change in output represents economies of scale in bookselling?
from 1,000 to 20,000 books sold per month
Based on the relationship between average total cost and marginal cost, which of the curves appears to be average total cost?
Curve 2
According to the table of data, when do diminishing returns in the production of pizzas begin?
When the third worker is hired
According to the table, what is the average total cost of producing 550 pizzas?
$5.00
The short run is a period of time where __________ while the long run is a period of time where __________.
at least one input is fixed, all inputs are variable
Based on the relationship between marginal and average product, which curve appears to be the average product curve?
curve 2
In the short-run, the cost that is independent of the amount of output produced is called __________.
fixed cost
Any cost that remains unchanged as output changes represents a firm's Any cost that changes as output changes represents a firm's Which of the following is most likely to be a fixed cost for a farmer? Which of the following is most likely to a variable cost for a business firm?
fixed cost. variable cost. insurance premiums on property cost of shipping products
What is a production function? A firm's production function is best described as
illustrating the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs.
Consider the table, which describes the amount of output produced by various quantities of workers. The marginal product of labor is The average product of labor is The marginal product of labor curve
initially increasing and then decreases. initially increasing and then decreases. intersects the average product of labor curve when the average product of labor is at a maximum.
Cakes can be produced using either a small or large bakery. The graph shows the average total cost of producing cakes using a small bakery (ATCS) and a large bakery (ATCL). Suppose Claire plans on selling 1000 cakes. If so, then Claire should choose to produce using a ________ bakery, where the average total cost of production is $______.
large $7 (b/c the ATCL at 1000 cakes costs 7.00)
Books can be produced using either a small or large bookstore. The graph shows the average total cost of producing books using a small bookstore (ATCS) and a large bookstore (ATCL). Suppose Claire plans on selling 1000 books. If so, then Claire should choose to produce using a ________ bookstore, where the average total cost of production is $______.
large, $3 (b/c the ATCL at 1000 books costs 3.00)
What is the name for the additional output that a firm produces as a result of hiring one more worker?
marginal product of labor
Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?
oppurtunity cost
What is occurring from the origin up until point A in this graph?
output increases at an increasing rate
The relationship between the inputs used by the firm and the maximum output it can produce is known as the:
production function
What does the short-run production function hold constant? A short-run production function holds constant
the amount of capital.
In economics, the best -definition of technology is _____ Further, positive technological change is defined as _____
the process a firm uses to turn inputs into outputs. both a and b. A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs.
When graphing a conventional short-run production function, we place __________ on the horizontal axis and __________ on the vertical axis.
the variable input, output
Based on the figure, up to which level of output will Ike's Ice Cream Kitchen have increasing marginal returns?
up to 10 gallons
The table above gives a firm's total product schedule. Suppose labor is the only variable input. The price of labor is $500 per week and total fixed costs are $600 per week. If 95 units are produced, the average total cost is
$32.63. [95 units takes 5 workers] (5 workers x $500) = $2,500 Add fixed cost of week ($2,500 + $600) = $3,100 ($3,100 / 95 units) = $32.63 Avg. Total Cost
According to the data in the table, what is the marginal cost of producing the 640th pizza?
$43.33
In the table, when output increases from 8 to 12 units, the marginal cost of one of those 4 units is
$5.00 Marginal Cost= [change in cost/change in quantity] ($70-50) / (12-8) = $5.00
According to the graph, over what range of output do we find constant returns to scale in bookselling?
Between 20,000 and 40,000 books
According to the graph, what size bookstore is more likely to experience diseconomies of scale?
Bookstores that sell more than 80,000 books per month
According to the graph, which of the following is more likely to occur when moving from point A to point B?
Diminishing returns
Which of the following are sometimes called accounting costs?
Explicit
Which graph is representative of a typical average total cost curve?
Graph B
What is the difference between the short run and the long run? Is the amount of time that separates the short run from the long run the same for every firm?
In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology. No
As illustrated in the figure, after 60 gallons are produced each hour at Ike's Ice Cream Kitchen, the ATC curve starts to slope upward. The ATC starts to slope upward because the
MC exceeds the ATC
Which of these costs are affected by the level of output produced?
Variable costs
What are implicit costs? An implicit cost is How are implicit costs different from explicit costs?
a nonmonetary opportunity cost. An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost.
If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?
as part of fixed cost
A hospital provides emergency-room medical care for local residents. Suppose the hospital currently provides this care for 15,000 patients per year at a total cost of $15,000,000. If the hospital expands, it can provide emergency-room medical care for 20,000 patients per year at a total cost of $70,000,000. If the hospital expands, will it be experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the hospital expands, it will be experiencing _________
diseconomies of scale Diseconomies of scale is the situation when a firm's long-run average costs rise as the firm increases output. Constant returns to scale is the situation when a firm's long-run average costs remain unchanged as it increases output.
The downward sloping part of the long run average total cost curve is where the firm is achieving:
economies of scale
A hospital provides emergency-room medical care for local residents. Suppose the hospital currently provides this care for 15,000 patients per year at a total cost of $45,000,000. If the hospital expands, it can provide emergency-room medical care for 20,000 patients per year at a total cost of $10,000,000. If the hospital expands, will it be experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the hospital expands, it will be experiencing ____________
economies of scale Economies of scale is the situation when a firm's long-run average costs fall as it increases output.
A hospital provides emergency-room medical care for local residents. Suppose the hospital currently provides this care for 15,000 patients per year at a total cost of $75,000,000. If the hospital expands, it can provide emergency-room medical care for 20,000 patients per year at a total cost of $70,000,000. If the hospital expands, will it be experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the hospital expands, it will be experiencing ________
economies of scale Economies of scale is the situation when a firm's long-run average costs fall as it increases output.
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:
increasing
According to the graph, which level of output represents the minimum efficient scale in bookselling?
20,000 books
In the short-run, the cost that is independent of the amount of output produced is called __________.
Fixed cost
According to the table, which of the following are implicit costs?
Foregone salary and foregone interest
Minimum efficient scale is the level of output at which:
all economies of scale have been exhausted
List the errors in the graph to the right (where AFC is average fixed cost, AVC is average variable cost, ATC is average total cost, and MC is marginal cost).
AFC should be MC, ATC should be AVC, and AVC should be ATC.
