E201 Inputs and Costs

Labor/Output/Total Variable Cost/Total Cost 0 0 0 30 1 3 20 50 2 8 40 70 3 12 60 90 4 14 80 110 5 15 100 130 In the above table, the total fixed cost is -$0 -$30 -$50 -$20

$30

Labor/Output/Total Variable Cost/Total Cost 0 0 0 30 1 3 20 50 2 8 40 70 3 12 60 90 4 14 80 110 5 15 100 130 In the above table, the average fixed cost of producing 15 units of output is -$8.66 -$0.50 -$2 -$6.66

$2

At an output of Q = 20, the average total cost(ATC) of a firm is $100, and its average fixed cost (AFC) is $40. What is this firm's total variable cost (TVC) at this output? -$1,800 -$2,400 -$1,200 -$700

$1,200

Ma Baensch's pickled herring factory has variable costs of $500 for 500 jars and variable costs of $503 for 501 jars. The marginal cost of the 501st jar is: -$5 -$3 -Unknown because we don't know fixed costs -$503

$3

Labor/Output/Total Variable Cost/Total Cost 0 0 0 30 1 3 20 50 2 8 40 70 3 12 60 90 4 14 80 110 5 15 100 130 In the above table, when output increases from 8 to 12 units, the marginal cost of one of those 4 units is -$10 -$1.20 -$2 -$5

$5

Labor/Output/Total Variable Cost/Total Cost 0 0 0 30 1 3 20 50 2 8 40 70 3 12 60 90 4 14 80 110 5 15 100 130 In the above table, the average total cost of producing 14 unit of output is -$7 -$8.67 -$6.75 -$7.86

$7.86

Marginal cost equals (i) the average fixed cost of the current unit. (ii) change in variable cost divided by change in quantity produced. (iii) change in total cost divided by change in quantity produced. -(i) and (ii) -(i) only -(ii) only -(ii) and (iii)

(ii) and (iii)

A firm's average total cost is $100, its average variable cost is $90 and its total fixed cost is $1,100. Its output is -80 -110 -100 -90

110

Labor/Total Product/Marginal Product 0 0 0 1 2 2 2 8 3 12 4 3 5 1 In the above table, the total product that can be produced with four workers is... -15 -8 -16 -12

15

Labor/Total Product/Marginal Product 0 0 0 1 2 2 2 8 3 12 4 3 5 1 In the above table, the marginal product of the second worker is -4 -3 -6 -5

6

Marginal cost eventually increases because -eventually each additional worker produces a successively smaller addition to output. -the marginal product of the variable input eventually falls. -of the law of diminishing returns. -all of the above answers are correct.

All of the above answers are correct.

Sam, a cost analyst for Jiffy, observes that when they are producing 800 jars of peanut butter an hour, their marginal cost is 53 cents ($0.53) and their average variable cost is only 55cents ($0.55). From this, Sam concludes that average total costs must be _________ and average variable costs must be ______________ as they increase production from 800 jars per hour. -Rising: rising. -Falling: rising -Falling: falling -Rising: Falling

Falling: falling

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run, -there are no fixed costs. -output is not a variable. -the number of workers used to produce the firm's product is fixed. -the size of the factory is fixed.

The size of the factory is fixed.

When marginal cost exceeds average total cost, -average total cost must be falling. -average fixed cost must be rising. -marginal cost must be falling. -average total cost must be rising.

average total cost must be rising.

One would expect to observe diminishing marginal product of labor when -crowded office space reduces the productivity of new workers -workers are discouraged about the lack of help from other workers -union workers are told to reduce their work effort in preparation for a new round of collective bargaining talks -only new workers are trained using the most productive capital

crowded office space reduces the productivity of new workers

When adding another unit of labor leads to an increase in output that is smaller than increases in output that resulted from adding previous units of labor, we have the property of -diminishing labor -diminishing marginal product -diminishing output -negative marginal product

diminishing marginal product

Diminishing marginal product suggests that the marginal -product of an extra worker is greater than the previous worker's marginal product. -cost of an extra worker is less than the previous worker's marginal cost. -cost of an extra worker is unchanged. -product of an extra worker is less than the previous worker's marginal product.

product of an extra worker is less than the previous worker's marginal product.