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Exam 13: The Costs of Production

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Question 51

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Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7. What is the value of B?

A) $25
B) $50
C) $100
D) $200

E) A) and B)
F) A) and C)

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Question 52

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Suppose that a firm's long-run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing

A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) specialization.

E) A) and C)
F) C) and D)

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Question 53

Multiple Choice

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Total revenue equals

Economists and accountants usually disagree on the inclusion of implicit costs into the cost analysis of a firm.

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product?

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's economic profits are

Although economists and accountants treat many costs differently, they both treat the cost of capital the same.

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

When a firm experiences constant returns to scale,

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7?

Table 13-13 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. -Refer to Table 13-13. One month, Teacher's Helper produced 18 instructional modules. What was the average fixed cost for that month?

The value of a business owner's time is an example of

Scenario 13-20 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. -Refer to Scenario 13-20. Average variable cost will be

Table 13-18 -Refer to Table 13-18. What is the average fixed cost of producing 450 units of output?

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Average total cost will increase if __________.