ECON 2020 CH 11 Production and Cost

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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


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