ECON 2020 CH 11 Production and Cost
Table 11-2 summarizes production at the Crunchy Apple Orchard for the month of April. Refer to 11-2. What is marginal product of the 4th worker?
50 bushels
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
Which of the following statements is false?
When marginal cost equals average total cost, average total cost is at its highest value
When firms analyze the relationship between their level of production and their costs they separate the time period involved into
The short run and the long run
The minimum efficient scale is
The smallest level of operation where long-run average costs are lowest
Marginal cost is calculated for a particular increase in output by
dividing the change in total cost by the change in output
Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move
Her implicit cost falls and her explicit cost rises
Which of the following is true at the output level where average total cost is at its minimum?
Marginal cost equals average total cost
Which of the following statements is false?
Marginal cost will equal average total cost when marginal cost is at its lowest point
If marginal product is greater than average product, then
Marginal product could either be increasing or decreasing
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
Refer to Figure 11-7. When the output level is 100, what is the total cost of production?
$2,000
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
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 variable cost per day when she produces 50 gyros using two workers?
$220
Refer to Table 11-7. What is the average variable cost per unit of production when the firm produces 90 lanterns?
$5.44
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
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
When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays
A constant returns to scale
An explicit cost is defined as
A cost that involves spending money
Which of the following equations is correct?
AFC + AVC = ATC
Which of the following equations is incorrect?
ATC = AVC - AFC
Marginal cost is the
Additional cost of producing an additional unit of output
Refer to Figure 11-2. Diminishing returns to labor set in
After L1
All of the following statements are true of the minimum efficient scale except one. Which one?
An increase in the output level will increase profit
Refer to Figure 11-5. Curve G approaches curve F because
Average fixed cost falls as output rises
Marginal cost is equal to the
Change in total cost divided by the change in output
If, when a firm doubles all its inputs, its average cost of production increases, then production displays
Diseconomies of scale
Refer to Figure 11-5. 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.
Average fixed costs of production
Fall as long as output is increased
Refer to Figure 11-1. If the marginal product of labor curve was plotted on this figure, with marginal product on the vertical axis, the marginal product of labor curve would
Interest the horizontal axis at a point between the 5th and 6th unit of labor
A firm has successfully adopted a positive technological change when
It can produce more output using the same inputs
Refer to Figure 11-4. What happens to the average fixed cost of production when the firm increases output from 150 to 200?
It falls
The formula for total fixed cost is
TFC = TC - TVC
Refer to Figure is 11-1. Diminishing marginal productivity sets in after
The 2nd worker is hired
Refer to Figure 11-2. The curve labeled "F" is
The average product curve
The total output product by a firm divided by the quantity of workers employed by the firm is the definition of
The average product of labor
Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor who has a store of the same size as yours, is currently selling about 10 machines a month at a price of $200 per machine. You expect to sell about 6 machines a month at a price of $220 per machine. If you lower your price, you expect to make a loss. Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?
The competing store probably has a lower average cost because average fixed cost falls as output increases
In his book, The Wealth of Nations, Adam Smith employed the example of a pin factory in order to explain what economic concept?
The division of labor
Refer to Figure 11-11. If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATC(c),
The firm will be operating efficiently
Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The average product of labor will equal 66 boxes when Manny hires
The fourth worker
The shape of the average total cost curve is determined by the shape of
The marginal cost curve
Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore,
The marginal product of the 5th worker is negative
The production function shows
The maximum output that can be produced from a set of inputs
Implicit costs can be defined as
The non-monetary opportunity cost of using the firm's own resources
Which of the following are implicit costs for a typical firm?
The opportunity cost of capital owned and used by the firm
Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes of fixed. Diminishing returns to labor are first observed in this example after Manny hires the ________ worker.
Third
The ABC Company manufactures routers that are used to provide high-speed Internet service. ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month. Therefore,
To reach minimum efficient scale ABC would have to sell at least 3,000 routers each month
Average total cost is equal to
Total cost divided by the level of output
Average total cost is
Total cost divided by the quantity of output produced
If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor
Will increase