Econ Exam 3 Chapter 11 Practice/Graded Homework Problems
Reference: Ref 11-2 (Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product of labor for five workers is _____ bushels. 75 55 11 45
75 (19 plus 17 plus 15 plus 13 plus 11)
Reference: Ref 11-25 (Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average variable cost of 4 cakes? $10.00 $8.00 $9.50 $38.00
9.50 38 divided by 4
marginal cost:
change in cost generated by additional unit of -output change tc divided by change in output -quantity (rise/run of total cost curve between two quantity levels
hink about running a restaurant. Probably: cooks and hosts are variable resources. valet parking staff is a fixed resource in the long run. cheese and other wholesale food items are fixed resources in the short run. a building is a variable resource in the short run.
cooks and hosts are variable resources
Diminishing returns to an input occur: when all inputs are variable. only when there are no fixed inputs. when some inputs are fixed and some are variable. when all inputs are fixed.
when some inputs are fixed and some are variable
Diminishing Returns Effect
larger the output, the greater the amount of the variable input that's required to produce additional units => increase AVC at bigger quantity outputs (intervals)
average variable cost
the variable per unit output VC/Q
The advantage of specialization in production is one of the primary reasons for decreasing returns to scale. False True
false
total cost
fixed plus variable
If average total cost is declining, marginal cost cannot be increasing. False True
false
Variable input
an input can be varied during same time period (ingredients)
Fixed Input
an input that can't be varied during same period (land, lease)
Total cost divided by the quantity of output produced is: always increasing. marginal cost. average total cost. always decreasing.
average total cost
(Problem 3c). The production function for Marty's Frozen Yogurt is given in the table below. Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day. What is the marginal cost per cup for the first 110 cups of yogurt? For the next 90 cups? A. Marginal cost for the first 110 cups of yogurt is $1.39 per cup, and then falls to $1.23 per cup for the next 90 cups. B. Marginal cost for the first 110 cups of yogurt is $1.23 per cup, and then rises to $1.64 per cup for the next 90 cups. C. Marginal cost for the first 110 cups of yogurt is $135, and then falls to $125 for the next 90 cups. D. Marginal cost for the first 110 cups of yogurt is $1.23 per cup, and then rises to $1.39 per cup for the next 90 cups.
marginal cost for the first 110 cups of yogurt is 1.23 per cup and then rises to 1.39 per cup for the next 90 cups
In the short run: some inputs are fixed and some inputs are variable. all costs are variable. all inputs are variable. all inputs are fixed.
some inputs are fixed and some inputs are variable
Reference: Ref 11-9 (Table: Total Cost Data) Look at the table Total Cost Data. What is the total fixed cost for this bicycle firm? $100 $50 $40 $70
$50
Reference: Ref 11-15 (Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. At 6 units of output, marginal cost is approximately: $120. $250. $100. $200.
200
Shape of MC: eventually it goes up
Mc intersects ATC at minimum of ATC
(Problem 2b). Marty's Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town. Marty owns three frozen-yogurt machines. His other inputs are refrigerators, frozen-yogurt mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily production function when he varies the number of workers employed (and at the same time, of course, yogurt mix, cups, and so on) is as shown in the accompanying table. Sketch the total product curve. Put the quantity of labor on the horizontal axis and the quantity of frozen yogurt on the vertical axis. Based on your graph, choose the correct statement. A. The total product curve is downward sloping. B. The total product curve is upward sloping, but not a straight line. C. The total product curve is a horizontal line. D. The total product curve is an upward-sloping straight line.
With more workers, more output can be produced, but this relationship is not constant. For more help, see section 11.1. the total product curve is upward sloping but not a straight line because it increases and then the slope keeps getting flatter
When marginal cost is rising: average total cost must be rising. both average variable cost and average total cost may be rising or falling. average variable cost must be rising. average variable cost and average total cost must be falling.
both average variable cost and average total cost may be rising or falling
long run period of time for which all inputs are variable
can be changed
The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will: increase at an increasing rate. increase at a decreasing rate. decrease. not change.
decrease
When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 48, and when she hires four workers, total product is 45. The marginal product of the third and fourth workers is: decreasing and negative. increasing and negative. decreasing and positive. increasing and positive.
decreasing and negative
The shape of the long-run average total cost curve is primarily due to: diminishing returns. economies and diseconomies of scale. technological change. increasing and then diminishing returns.
diminishing returns
In economics, the short run is: less than 1 week. less than 1 month. enough time to vary output but not plant capacity. enough time to change all inputs to production.
enough time to vary output but not plant capacity
Marginal cost is the: increase in total cost when one more unit of output is produced. ratio of average total cost to total cost. increase in output from the addition of one unit of labor. reduction in cost from economies of scale.
increase in total cost when one more unit of output is produced
net's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression, Janet is operating in the: long run, and her fixed costs are $100. long run. short run, and her fixed costs are $100. short run, and there are no fixed costs.
short run and her fixed costs are 100 dollars
fixed cost
some things you can't change in the short run
Reference: Ref 11-18 (Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm is producing at point C on the ATC2 but anticipates increasing output to 225,000 units in the long run, the firm will build a _____ plant and have _____ of scale. bigger; economies bigger; diseconomies smaller; diseconomies smaller; economies
the atc 2 curve means that they have to produce more output at a lower cost thus they will build a bigger plant but it will have a negative slope so a diseconomics of scale
In the short run, as output gets larger: marginal cost gets smaller. average total cost decreases after the point of diminishing returns. the average variable cost curve gets closer to the average total cost curve. fixed cost gets smaller.
the average variable cost curve gets closer to the average total cost curve
average fixed cost
the fixed cost per unit of output FC/Q
Spreading Effect
the larger the output the more spread out the fixed cost leading to slower and lower average fixed cost
production function
the relationship between the quantity a firm produces output and the quantity of inputs (factors of production)
A firm's marginal cost is: the ratio of the change in total output to the change in the quantity of labor. the slope of the total cost curve. the slope of the average variable cost curve. the ratio of the change in fixed cost to the change in the quantity of output.
the slope of the total cost curve
average total cost
the total cost divided by output TC/Q--> cost per unit of production
Average total cost is: the change in quantity divided by the change in labor costs. the change in variable cost divided by the change in quantity. total cost divided by quantity. total cost times quantity.
total cost divided by quantity
For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____ of photographs. marginal cost; number average cost; number total cost; marginal product total cost; number
total cost; quantity or number
Tankao makes Bluetooth sets for mobile devices. When 50 Bluetooth sets are produced in the short run, the average variable cost is $30. Tankao's average _____ cost is _____. total; greater than $30. total; $30. fixed; $30. total; less than $30.
total; greater than 30
Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford: will decrease (the MC curve will shift down). is at its maximum. will increase (the MC curve will shift up). will be unchanged.
will decrease aka the marginal cost curve will shift downward because when the output per worker increases at first when a firm is just starting out they have a certain fixed cost in the short run that causes the spreading effect before the output increases that also has higher production level/cost
short run period of time for which at least 1 input is fixed
1 input can't change
variable cost
things effected by output produced
Shape of ATC
u shape spreading effect drives it down over low quantities diminishing returns effect drives it up at high quantities
An input whose quantity can be changed in the short run is a(n) _____ input. marginal incremental variable fixed
variable
You run a business producing picture frames. This month your total cost of production is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture frames. It follows that average _____ cost is _____. total; $1 variable; $2 total; $3 fixed; $1
variable; $2
Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. The average variable cost of producing 4 purses is: $47.50. $140.00. $190.00. $35.00.
35
(Problem 2c). Marty's Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town. Marty owns three frozen-yogurt machines. His other inputs are refrigerators, frozen-yogurt mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily production function when he varies the number of workers employed (and at the same time, of course, yogurt mix, cups, and so on) is as shown in the accompanying table. What is the marginal product of the first worker? The second worker? The third worker? Why does the marginal product of labor (MPL) decline as the number of workers increases? A. The marginal product of labor is 110 cups for the first worker, 90 cups for the second worker, and 70 cups for the third worker. The MPL declines due to the principle of spreading the overhead. B. The marginal product of labor is 70 cups for the first worker, 90 cups for the second worker, and 110 cups for the third worker. The MPL increases due to the principle of diminishing returns to labor. C. The marginal product of labor is 110 cups for the first worker, 70 cups for the second worker, and 90 cups for the third worker. The MPL declines due to the principle of diminishing returns to labor. D. The marginal product of labor is 110 cups for the first worker, 90 cups for the second worker, and 70 cups for the third worker. The MPL declines due to the principle of diminishing returns to labor. Correct! The MPL decreases as more workers are hired, as a result of diminishing returns to labor. For more help, see section 11.1.
D. The marginal product of labor is 110 cups for the first worker, 90 cups for the second worker, and 70 cups for the third worker. The MPL declines due to the principle of diminishing returns to labor. Correct! The MPL decreases as more workers are hired, as a result of diminishing returns to labor. For more help, see section 11.1.
(Problem 2a). Marty's Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town. Marty owns three frozen-yogurt machines. His other inputs are refrigerators, frozen-yogurt mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily production function when he varies the number of workers employed (and at the same time, of course, yogurt mix, cups, and so on) is as shown in the accompanying table. What are the fixed inputs and variable inputs in the production of cups of frozen yogurt? Choose the correct statement. A. Frozen-yogurt machines are a variable input. B. Frozen-yogurt mix is a fixed input. C. Workers are a fixed input. D. Frozen-yogurt machines are a fixed input. Marty has two fixed inputs: frozen-yogurt machines and refrigerators. All other inputs are used more when more output is produced. For more help, see section 11.1.
Marty has two fixed inputs: frozen-yogurt machines and refrigerators. All other inputs are used more when more output is produced. For more help, see section 11.1.
