Microeconomics Chapter 11

(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 200 cakes per day, what is her average total cost?

$16.50

(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases one mixer and bakes 100 cakes per day, what is her average total cost?

$20

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 45 bushels of soybeans is:

$350

(Table Cost Data) Look at the table Cost Data. The average variable cost of producing 5 purses is:

$38

(Table: Workers and Output) Look at the table Workers and Output. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The total cost of producing 48 statues is:

$60

If marginal cost is less than average total cost, then _____ cost is _____.

average total; decreasing

When a firm adds capital, in the short run variable costs for any level of output will:

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.

(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from B to C.

decreasing returns to scale

A university that benefits from lower costs per enrolled student as it builds more buildings and enrolls more students is an example of a service provider with:

economies of scale.

Buffalo Aircraft doubles the amount of all of the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs is unchanged, this means that Buffalo Aircraft is operating with

economies of scale.

It is common in large breweries for the long-run average total cost to decline as output increases. This indicates that many breweries operate with:

economies of scale.

(Table: Total Product and Marginal Product) Look at the table Total Product and Marginal Product. Negative marginal returns begin when the ____ worker is added.

eighth

As Defined in the text, the long run is a planning period:

in which a firm can adjust all resources.

If your firm is operating in the negatively sloped portion of a long-run average total cost curve, then your production exhibits:

increasing returns to scale.

(Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. Tonya's fixed:

input is land.

Decreasing and increasing returns to scale account for the shape of the:

long-run average total cost curve.

(Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve labeled V represents the firm's ___ cost curve.

marginal

The ____ is the increase in output that is produced when a firm hires an additional worker.

marginal product

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

marginal product.

The slope of a long-run average total cost curve exhibiting increasing returns to scale is:

negative

Average total cost is:

total cost divided by output

The costs associated with variable inputs are _____, and the costs associated with _____ inputs are _____.

variable; fixed; fixed

Marginal cost can be calculated as:

ΔTC / ΔQ, where TC is total cost and Q is output; ΔVC / ΔQ, where VC is variable cost and Q is output; and as the slope of the total cost curve.

When marginal cost is ABOVE average variable cost, average variable cost must be:

rising.

In the short run:

some inputs are fixed and some inputs are variable.

(Table: Costs of Producing Bagels) Look at the table Costs of Producing Bagels. The marginal cost of producing the second bagel is:

$0.10

(Table: Costs of Producing Bagels) Look at the table Costs of Producing Bagels. The average total cost of producing 6 bagels is:

$0.15

(Table: Costs of Producing Bagels) Look at the table Costs of Producing Bagels. The average total cost of producing 6 bagels is:

$0.90

(Table: Cost of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed cost are $10. What is the average total cost of 4 cakes?

$12.00

(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 200 cakes per day, what is her average fixed cost?

$12.50

(Table: Cost of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 4 cakes?

$2.50

(Table: Cost Data) Look at the table Cost Data. The average variable cost of producing 4 purses is:

$35.00.

(Table: Workers and Output) Look at the table Workers and Output . After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The variable cost of producing 43 statues is:

$40

(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 5 purses is:

$48

(Table: Output and Costs) Look at the table Output and Costs. When output is 4, total variable cost equals:

$48

(Table: Cost of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 2 cakes?

$5.

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is _____ bushels.

300

(Table: Production of Bagels) Look at the table Production of Bagels. The marginal product of the fifth worker is _____ bagels.

9,000

(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product of labor for eight workers is ____ bushels.

96

For the most restaurants, the average total cost curve____ at _____ levels of output, then _____ at _____ levels.

Falls; low; rises; high

(Table: Production of Bagels) Look at the table Production of Bagels. Diminishing marginal returns begin with the addition of the ______ worker.

Fourth

Krista's dry-cleaning business incurs $900 per month in fixed costs. Last month her total output was 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost ____ by a little more than ____.

Increased; 3.33 cents

Average total cost is:

Total cost divided by quantity

The term diminishing returns refers to:

a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

(Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. Tonya is operating:

in the short run

In the long run:

the firm has time to change the level of all inputs.

A firm's marginal cost is

the ratio of the change in total cost to the change in the quantity of output.

A firm's marginal cost is:

the ratio of the change in total cost to the change in the quantity of output.