ECON Ch. 11 HW

Firms experience economies of scale for several reasons. What is one such​ reason? A firm might experience economies of scale because

As a firm expands, it may be able to borrow money more inexpensively.

- A firm uses capital and labor to produce output. The isoquant graph to the right illustrates the​ firm's technology with isoquant curves. A couple of input combinations are also indicated in the figure. Suppose the firm is currently using a combination of inputs indicated by point C. Which of the indicated input bundles would produce the same amount of output​ (as input combination C​)? - Which of the indicated input bundles would produce more ​output?

- Input combination B would produce the same amount of output because it is on the same isoquant. - Input combination A would produce more output because it is on a higher isoquant.

- How can marginal cost be expressed​ mathematically? Marginal cost​ (MC) can be expressed as

- MC=ΔTCΔQ​, where TC is total cost and Q is output.

- Refer to the to graph on the right. For a certain output range​ (or quantity of pizzas produced per​ day), marginal cost is greater than average cost. What is this output​ range? - When marginal cost is less than average total​ cost, average total cost must be

- The output range greater than about 525 pizzas per day - Decreasing

An example of technological change is

A. being able to produce the same output using fewer inputs. B. being able to produce more output using the same inputs. C. a decline in the quantity of output that can be produced from a given quantity of inputs.

Suppose a company mows yards with workers and​ lawn-mowing equipment. The​ firm's isocost line will show

All the combinations of workers and equipment that have the same total cost.

What is the difference in the short run and the long​ run? In the short​ run,

At least one of the​ firm's inputs is​ fixed, while in the long​ run, the firm is able to vary all its​ inputs, adopt new​ technology, and change the size of its physical plant.

Your company incurs a cost for factory rent​, ​which, in the short​ run, is fixed. What happens to this cost in the long​ run? In the long​ run, the cost of factory rent

Becomes a variable cost.

Goodlife Corp. manufactures good X for both domestic and international consumers. The management is planning to increase production at its existing facilities to meet the increasing demand from its international customers. Lauren​ Whittle, the operations​ head, was asked to submit a report to the board of directors regarding the daily cost of production. The table given below lists the changes in the total​ cost, when production is increased from zero to ten units in a day. Suppose labor is the only variable input used in production at this facility. Which of the following can Lauren infer about labor productivity from the information given in the​ table?

Both average and marginal product of labor rises when the firm produces the first five units of the good.

The figure to the right illustrates the​ short-run cost curves for a company that produces cell phones. Identify the average total cost curve​ (ATC), the average variable cost curve​ (AVC), the average fixed cost curve​ (AFC), and the marginal cost curve​ (MC) in the figure.

C3C2C1C4

- The figure to the right illustrates the​ long-run average cost curve for a company that makes motors. Suppose the company produces 6 thousand motors per month. Is it experiencing economies of​ scale, diseconomies of​ scale, or constant returns to​ scale? If the company produces 6 thousand​ motors, then it experiences - At what level of output does the firm experience the minimum efficient​ scale? The minimum efficient scale occurs when the firm produces nothing _____ thousand motors.

Diseconomies of scale. - 5

How can marginal cost be expressed​ mathematically? Marginal cost​ (MC) can be expressed as

MC=ΔTCΔQ​, where TC is total cost and Q is output.

Economists assume that firms search for the​ cost-minimizing combination of inputs that will allow them to produce a given level of output. On what two factors does the​ cost-minimizing combination of inputs​ depend? The​ cost-minimizing combination of inputs depends on

Technology and input prices

What is the production​ function? The production function is the relationship between

The inputs employed by a firm and the maximum output it can produce with those inputs.

Consider the production of hotdogs. Given the average total cost of producing hotdogs illustrated in the graph to the​ right, which of the following is true of the marginal cost of producing​ hotdogs?

The marginal cost of producing up to 400 hotdogs is less than the average total​ cost, but the marginal cost of producing more than 400 hotdogs is greater than the average total cost. The marginal cost of production is exactly equal to the average total cost at 400 hotdogs.

What is​ technology? Technology is

The processes a firm uses to turn inputs into outputs of goods and services.

Mortley​ Inc., a small firm that manufactures good​ A, is targeting a new segment of the market. During a​ meeting, the managers analyze the following production data provided by the operations department. The table given below shows the total output produced by the 12 workers at the plant. Assuming that labor is the only variable​ input, which of the following can most reasonably be inferred from the information given in the table​ above?

The​ firm's marginal cost is at its minimum when it hires the seventh worker.

Which of the following is true of the relationship between the average product of labor and the marginal product of labor?

Whenever the marginal product of labor is greater than the average product of​ labor, the average product of labor must be increasing.

Suppose that last semester your semester GPA was 3.90 and your resulting cumulative GPA was 2.67. ​Next, suppose that this semester your semester GPA will be 3.10. If​ so, then your cumulative GPA

Will increase because your​ "marginal" GPA will be above your cumulative GPA.

The marginal cost of production shows the change in a​ firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost​ curve? ​Graphically, the marginal cost curve is

a U​ shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

Does the production of flowers experience the effects of the law of diminishing returns? The effects of the law of diminishing returns

are experienced when the third worker is hired.

A firm produces output using capital and labor. The​ firm's marginal product of labor ​(MPL​) is 50 and its marginal product of capital ​(MPK​) is 10. Suppose the wage per unit of labor​ (w) is ​$6.00 and the cost per unit of capital​ (r) is ​$3.00. Is the firm minimizing the cost of​ production? What should the firm​ do, if​ anything, to produce the same level of output at lower​ cost? The firm

is not minimizing the cost of production and should use more labor and less capital.