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Exam 13: The Costs of Production

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Question 131

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Accounting profit is equal to

A) marginal revenue minus marginal cost.
B) total revenue minus the explicit cost of producing goods and services.
C) total revenue minus the opportunity cost of producing goods and services.
D) average revenue minus the average cost of producing the last unit of a good or service.

E) None of the above
F) All of the above

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Question 132

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Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

A) in the short run but not in the long run.
B) in the long run but not in the short run.
C) both in the short run and in the long run.
D) neither in the short run nor in the long run.

E) None of the above
F) B) and D)

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Question 133

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Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

When a firm is experiencing economies of scale, long-run

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?

When marginal cost is rising, average variable cost

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. -Refer to Scenario 13-8. What are Wanda's explicit costs per glass?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At output levels greater than N, the firm experiences

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

Figure 13-3 -Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function (not pictured) ?

Which of the following statements is correct?

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 over the entire range of output?

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

Table 13-18 -Refer to Table 13-18. What is the average total cost of producing 525 units of output?

Marginal cost equals (i) Change in total cost divided by change in quantity produced.(ii) Change in variable cost divided by change in quantity produced.(iii) The average fixed cost of the current unit.

A firm has a fixed cost of $200 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units?

Scenario 13-22 Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another salon. -Refer to Scenario 13-22. What is the accounting profit for the hair styling salon?

Which of the following statements about costs is correct?

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 2 workers, the total cost of production is $100. When the firm hires 3 workers, the total cost of production is $120. In addition, assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired. What is the firm's fixed cost?