ECON 101 - CH 13 Questions
Total cost can be divided into two types of costs:
fixed costs and variable costs.
Some costs do not vary with the quantity of output produced. Those costs are called
fixed costs.
The long-run average total cost curve is always
flatter than the short-run average total cost curve, but not necessarily horizontal.
Which of the following explains why long-run average cost at first decreases as output increases?
gains from specialization of inputs
The marginal product of any input is the
increase in total output obtained from one additional unit of that input.
At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve, average variable cost
rises.
When comparing short-run average total cost with long-run average total cost at a given level of output,
short-run average total cost is typically above long-run average total cost.
The market value of the inputs a firm uses is called
total cost.
Accounting profit is equal to
total revenue minus the explicit cost of producing goods and services.
Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's
total revenue was $9 million.
A firm's opportunity costs of production are equal to its
explicit costs + implicit costs.
Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal
$1,000.
If Danielle sells 300 wrist bands for $0.50 each, her total revenues are
$150.
Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?
$170
Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are
$25.
Average total cost equals
(fixed costs + variable costs) divided by quantity produced.
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?
15 bouquets
Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is
16 units of output.
Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average variable cost of production when the firm hires 7 workers?
75 cents
Average total cost (ATC) is calculated as follows:
ATC = (total cost)/(quantity of output).
At low levels of production, the firm
All of the above are correct: benefits from increased size because it can take advantage of greater specialization, has the potential for economies of sale, is unlikely to experiences acute problems with coordination
Which of the following statements about costs is correct?
As the quantity of output increases, marginal cost eventually rises.
Jennifer is a junior in college. Her current cumulative grade point average (GPA) is 3.5 out of a 4.0 scale. Jennifer is hoping that by the time she graduates, she can raise her cumulative GPA to a 3.7. Which of the following statements is correct?
Jennifer must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7.
Randy is a minor-league baseball player. His current cumulative batting average is 0.270. Randy believes that if he can raise his cumulative batting average to 0.300, he will have a chance to play in the major leagues. Which of the following statements is correct?
Randy must get more than 30 hits out of his next 100 at bats in order to raise his cumulative batting average to 0.300.
Which of these assumptions is often realistic for a firm in the short run?
The firm can vary the number of workers it employs but not the size of its factory.
Foregone investment opportunities are an example of
an implicit cost.
A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period
are short-run decisions.
Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"
average total cost
When a firm is experiencing economies of scale, long-run
average total cost is greater than long-run marginal cost.
If marginal cost is greater than average total cost, then
average total cost is increasing.
When a firm is experiencing diseconomies of scale, long-run
average total cost is less than long-run marginal cost.
When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing
diminishing marginal product.
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing
economies of scale.
In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits
economies of scale.
The total cost to the firm of producing zero units of output is
its fixed cost in the short run and zero in the long run.
When a firm experiences constant returns to scale,
long-run average total cost is unchanged, even when output increases.
Economies of scale occur when a firm's
long-run average total costs are decreasing as output increases.
Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"
marginal cost
The minimum points of the average variable cost and average total cost curves occur where the
marginal cost curve intersects those curves.
If marginal cost is rising,
marginal product must be falling.
Total cost is the
market value of the inputs a firm uses in production.
The efficient scale of the firm is the quantity of output that
minimizes average total cost.
Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's
opportunity costs.
The things that must be forgone to acquire a good are called
opportunity costs.
Total revenue equals
price x quantity.
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
the cost of bookkeeping services
If a firm uses labor to produce output, the firm's production function depicts the relationship between
the number of workers and the quantity of output.